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GE Replaced By Walgreens In Dow Jones Industrial Average

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Industrial conglomerate General Electric Co. (GE), one of the original components of the Dow Jones Industrial Average, has been replaced by Walgreens Boots Alliance Inc. (WBA) in the blue-chip index. The change comes into effect prior to the open of trading on Tuesday, June 26.

The 122-year-old Dow Jones Industrial Average, or simply the Dow, is a stock market index with 30 component companies. The value of the Dow is not a weighted arithmetic mean. Instead, it is the sum of the price of one share of stock for each component company.

"General Electric was an original member of the DJIA in 1896 and a member continuously since 1907. Since then the U.S. economy has changed: consumer, finance, health care and technology companies are more prominent today and the relative importance of industrial companies is less," said David Blitzer, Managing Director and Chairman of the index committee at S&P Dow Jones Indices.

GE, with a market capitalization of $112.6 billion, has seen a nearly 54 percent fall in its share price during the past one year.

Investors have been worried about the company's struggling business. Last year, the company was forced to slash its dividend, cut thousands of jobs and overhaul its leadership.

Walgreens, GE's replacement on the Dow, is a retail drug store chain. Headquartered in Deerfield, Illinois, it operates as a pharmacy-led health and wellbeing company.

Blitzer noted that with the addition of Walgreens, the Dow will be more representative of the consumer and health care sectors of the U.S. economy. He added that the change to the Dow will make the index a better measure of the economy and the stock market.

According to S&P Dow Jones Indices, the change will not disrupt the level of the Dow, which is a price-weighted index.

The divisor used to calculate the index from the components' prices on their respective home exchanges will be changed prior to the opening on June 26. The procedure will prevent any distortion in the index's reflection of the portion of the U.S. stock market it is designed to measure.

The last change to the Dow was in September 2017, when DowDuPont Inc. replaced DuPont on the index. DowDuPont was formed by the merger of Dow Chemical Company with DuPont.

by RTTNews Staff Writer

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