S&P Dow Jones Indices announced today that it was dropping Kraft Foods Inc. from the Dow Jones industrial average and replacing it with managed-care company UnitedHealth Group Inc., Dow Jones Newswires reported.
The Dow is a 30-stock index designed to show investors how the entire stock market is performing, according to the Associated Press. The Dow Jones Average Index Committee, which includes the managing editor of the Wall Street Journal, periodically adjusts the composition of the group.
S&P Dow Jones Indices said it was dropping Kraft because the company is about to spin off its North American grocery business and that will make it too small for the blue-chip average, Dow Jones Newswires reported.
The index committee chose UnitedHealth Group to take Kraft’s spot because healthcare is increasingly important in the American economy, David Blitzer, chairman of the index committee, said, according to the AP.
The other healthcare companies on the index are pharmaceutical giants Johnson & Johnson, Merck & Co. and Pfizer Inc., according to Dow Jones Newswires.
"The shift reflects the growing importance of healthcare expenses," Peter Jankovskis, co-chief investment officer at Oakbrook Investments, told Dow Jones Newswires. "The change makes sense in terms of what the Dow is trying to do as a 30-component representation of the US economy."
UnitedHealth is the second insurance company on the index, joining Travelers Companies Inc., which doesn't offer health insurance, the AP reported.