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Photo illustration: Sarah Grillo/Axios. Photo: Johannes Eisele/AFP via Getty Images

For all its weakness as a stock-market gauge, the Dow Jones Industrial Average continues to tell us a lot about the state of corporate America, as opposed to the state of the equity market.

Why it matters: The Dow is a slice of America masquerading as a stock-market index.

How it works: The Dow is not what it used to be.

  • I mean that literally: The Dow Jones Industrial Average has had 30 components since Oct. 1, 1928. As of this Monday, none of the original companies will be represented in the average.
  • The Ship of Theseus has now officially sailed: The last surviving member of the original 30, ExxonMobil (f/k/a Standard Oil of New Jersey), is being ejected from the index in favor of Salesforce, a company founded in 1999.
  • ExxonMobil's rival, Chevron (f/k/a Standard Oil of California), still remains, but that's it for energy companies. Chevron accounts for a mere 2% of the Dow, which is weighted on nominal share price rather than market capitalization.

Because nominal share price matters so much to the Dow, Apple's recent decision to do a four-for-one stock split forced the biggest changes to the average since at least 2013. Pfizer and Raytheon are also out; Amgen and Honeywell replace them.

Between the lines: The Dow has accepted Nasdaq-listed companies since 1999, when Microsoft and Intel joined. But tech giants of more recent vintage are still absent.

  • Amazon and Alphabet can't join because their share price is too high, and Facebook is a victim of its classification as "communication services" rather than "technology."

The big picture: The Dow is anachronistic in many ways, a creature of a time when it was easier to buy 30 stocks than to buy 500, and when "I'll take one share of each" was the height of sophistication in how people diversified their holdings.

  • Still, the Dow represents a representative cross-section of America's large-cap universe, including names such as McDonald's, JPMorgan Chase, Walt Disney, Coca-Cola, Nike, and Procter & Gamble.

The bottom line: The Dow has been a notorious underperformer in recent years, when it comes to stock market indices. But if it can't keep up with the stock market as a whole, that's a sign of just how narrow the recent advance has been.

How the Dow has lagged
Expand chart
Data: FactSet; Chart: Axios Visuals

Even with Apple accounting for more than 12% of the Dow, the average has underperformed all broad stock market indices this year.

  • After its stock split, Apple will account for less than 3% of the Dow.
  • From Monday onwards, two of the three biggest Dow components will be healthcare companies. UnitedHealth and Amgen will make up almost 13% of the Dow between them.
  • Merck and Johnson & Johnson bring the health care sector up to 18.6% of the Dow. That's significantly larger than the S&P 500, where the health care sector is 14.2% of the index.

Go deeper

Tracking the Dow's road to 30,000

It took 218 trading days for the Dow to hit the latest 1,000-point milestone.

Why it matters: Dow 30K is a purely symbolic milestone. The Dow hitting 30,001, for instance, is no less significant.

52 mins ago - World

Putin foe Navalny to be detained for 30 days after returning to Moscow

Russian opposition leader Alexey Navalny. Photo: Oleg Nikishin/Epsilon/Getty Images

Russian opposition leader Alexey Navalny has been ordered to remain in pre-trial detention for 30 days, following his arrest upon returning to Russia on Sunday for the first time since a failed assassination attempt last year.

Why it matters: The detention of Navalny, an anti-corruption activist and the most prominent domestic critic of Russian President Vladimir Putin, has already set off a chorus of condemnations from leaders in Europe and the U.S.

Biden picks Warren allies to lead SEC, CFPB

Photo: Justin Sullivan/Getty Images

President-elect Joe Biden has selected FTC commissioner Rohit Chopra to be the next director of the Consumer Financial Protection Bureau (CFPB) and Obama-era Wall Street regulator Gary Gensler to lead the Securities and Exchange Commission (SEC).

Why it matters: Both picks are progressive allies of Sen. Elizabeth Warren (D-Mass.) and viewed as likely to take aggressive steps to regulate big business.