GM, Citigroup Removed From Dow

By
ETF.com Staff
June 01, 2009
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Though not an unpredictable move, Citigroup could eventuallyreturn to the DJIA.

 

The Dow Jones Index Oversight Committee announced today thatGeneral Motors (NYSE: GM) and Citigroup (NYSE: C) will be removed from the DowJones Industrial Average, effective June 8. Tech giant Cisco Systems (NASDAQ:CSCO) and the insurance-focused The Travelers Companies (NYSE: TRV) will taketheir places.

The move will boost the already-heavy technology weightingin the Dow, and will add an insurance company to take the place formerly heldby AIG, which exited the index in September 2008.

For GM and Citigroup, the removal was predictable. GM'sbankruptcy automatically disqualified the company from the index, and Citigrouphas become essentially a government ward with an uncertain future ahead of it.

"We were reluctant to remove Citigroup at the height ofthe financial frenzy, but it is clear that the bank is in the midst of asubstantial restructuring which will see the government with a large andongoing stake," said Robert Thomson, editor-in-chief of Dow Jones, in astatement.

The selection of Cisco comes as little surprise. It has thethird-largest market capitalization of any U.S. company not previouslyincluded in the Dow, trailing only Google and Apple. Its servers essentiallyrun the Internet, which occupies a central place in the American economy.

Travelers, however, is a bit of an unusual choice, due toits relatively small size. With a market cap of $24 billion, it isn't even thelargest insurer in America;that claim falls first to Berkshire Hathaway, and second to MetLife. It is the78th-largest component in the S&P 500, and will be thesecond-smallest company in the Dow (after Caterpillar, with a market cap of $22billion).

While there is no requirement for the Dow to hold thelargest companies in America,reaching this deep into the market capitalization spectrum is unusual. Manyexpected a larger financial services company, such as Wells Fargo, to enter theindex instead. Clearly, however, the Dow Jones team felt that insurance was anecessary industry to represent in the index, and they chose Travelers to lockdown the property and casualty segment of the industry.

This is not the first time Travelers has been in the index.The company entered the index in 1997, and was then acquired by Citigroup in1999.

Recently, in fact, a number of companies have made round-tripsto the index. AT&T was booted from the index in April 2004, only tore-enter in December 2005 after its merger with Dow component SBCCommunications. Chevron was shoved from the index in 1999, only to return inFebruary 2008.

The editorial team at Dow Jones suggested that another round-tripcould be coming.

"We genuinely hope that once [Citigroup] has refashioneditself that we will again be able to consider it for inclusion," said Thomson. "Citigroupis a renowned institution, not only in this country, but around the world."

 

ETF DAILY DATA

Investors plowed money into currency-hedged equity funds like ‘HEDJ’ and ‘DBEF’ on Wednesday, March 4, while yanking assets out of sundry bond funds, such as ‘HYG.’ Total U.S.-listed ETF assets dropped to $2.084 trillion as a market pullback offset net inflows.

Sizable outflows from various iShares bond funds paced that firm’s outflows on Wednesday, March 4. Total U.S.-listed ETF assets ended the day at $2.084 trillion.

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