They are fiddling with the index regarding the financials. So any guess regarding where the DOW will bottom is just a guess. News Corp owns Dow Jones! AIG dud removed but not replaced!
Dow Jones to Change the Composition of the Dow Jones Industrial Average Kraft Foods to Replace American International Group
NEW YORK, Sept. 18, 2008 (GLOBE NEWSWIRE) -- Kraft Foods Inc. (KFT) will replace American International Group Inc. (AIG) in the Dow Jones Industrial Average, effective with the opening of trading on September 22, Dow Jones & Company announced.
The 112-year-old stock index was previously changed on February 19, 2008, when two stocks out of 30 were replaced.
"We are refraining at this point from adding another stock in the financial industry because of the extremely unsettled conditions. We realize this decision leaves the Dow Jones Industrial Average under-weighted in financials, and we will address this situation in due course," said Robert Thomson, managing editor of The Wall Street Journal. The Journal's top news editor oversees the makeup of "The Dow," which Charles H. Dow created as a 12-stock index in May 1896 and today is the best-known stock-market barometer in the world.
"We are adding Kraft because the Dow Jones Industrial Average had no representation in food products. Kraft is one of the world's leading food companies," Mr. Thomson said.
John A. Prestbo, editor of Dow Jones Indexes, said, "There are no pre-determined criteria for a stock to be added or deleted, though we intend that all components be established U.S. companies that are leaders in their industries." For the sake of continuity, composition changes are intentionally rare, Mr. Prestbo said, "although this time change was forced by the effective nationalization of AIG and its very low stock price." AIG has been in the Industrial Average since April 1, 2004.
The changes won't cause any disruption in the level of the index. The divisor used to calculate The Dow from its components' prices on their respective home exchanges will be changed prior to the opening on September 22. This procedure prevents any distortion in The Dow's reflection of the U.S. stock market.
