Amazon.com Inc. (NASDAQ:AMZN) has secured a coveted spot in the Dow Jones Industrial Average, one of Wall Street’s most prestigious stock indexes. The e-commerce giant will officially become a member of the 30-company Dow on Monday, replacing Walgreens Boots Alliance.

S&P Dow Jones Indices decided to include Amazon in the Dow and remove Walgreens to rebalance the index following a 3-for-1 stock split by another Dow component, Walmart. Amazon will now join the ranks of other prominent companies in the Dow, including Apple, Boeing, JPMorgan Chase, and Coca-Cola.

The Dow Jones Industrial Average, established in 1896, is a measure of 30 stocks representing well-established, “blue chip” companies considered stable investments. Over time, the index has evolved to include companies from various sectors, not just industrial ones.

Amazon’s inclusion in the Dow reflects the changing nature of the American economy, with a focus on consumer retail. The move also highlights the company’s significant impact and growth in the market.

While the Dow is a widely recognized index, professional investors often look at broader measures such as the S&P 500, which includes nearly 17 times more companies. Despite this, the Dow remains important due to its long history and status as a benchmark for the stock market.

The performances of the Dow and the S&P 500 have historically been similar, but they have diverged in recent years. The S&P 500, with its heavier emphasis on Big Tech stocks, has outperformed the Dow, particularly in 2022 and 2023.

The Dow’s method of weighting stocks differs from the S&P 500. The Dow gives more weight to stocks with higher prices, while the S&P 500 gives more weight to stocks based on their overall market capitalization.

Inclusion in the Dow is a significant milestone for Amazon, solidifying its position as a major player in the market and reflecting its influence on the broader economy.

Featured Image: Unsplash @ Christian Wiediger

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