Amazon Just Made It to the Big Time on Wall Street

Amazon is joining the ranks of one of Wall Street's oldest and most exclusive stock indexes: the Dow Jones Industrial Average. The e-commerce pioneer will officially take its position in the 30-company Dow before the open of trading Monday, replacing drugstore operator Walgreens Boots Alliance, per the AP. S&P Dow Jones Indices opened the door to Amazon's inclusion in the Dow and Walgreens' exit to rebalance the index in light of a 3-for-1 stock split by another Dow company, Walmart. Seattle-based Amazon will share membership in the Dow with the likes of Apple, Boeing, JPMorgan Chase, and Coca-Cola.

• What is the Dow? It's a measure of 30 stocks of established companies. These stocks are sometimes known as "blue chips," which are supposed to be on the steadier and safer side of Wall Street.

• What's in the Dow? The roster has changed many times since the Dow began in 1896 as the US economy has transformed. Added recently have been big tech companies like Apple, Intel, and Microsoft. The financial industry also has a healthy representation with American Express, Goldman Sachs, and JPMorgan Chase. So does health care, with Amgen, Johnson & Johnson, Merck, and UnitedHealth Group.
• Why is Amazon in and Walgreens out? The shift is a reaction to a planned 3-for-1 stock split by Walmart. Because the Dow is a price-weighted index, which means stocks that fetch higher prices are given more weight, Walmart's stock split will reduce the weighting of the stock. To account for this, S&P Dow Jones Indices is rebalancing the index by dropping Walgreens, which currently has the lowest stock price in the Dow, and adding Amazon.
• The repercussions: Amazon's entry into the Dow, Walgreens' exit, and Walmart's stock split will cause a ripple effect on the weighting of Dow stocks. Once the shift is completed, Amazon's weight in the Dow will rank 17th out of 30 stocks. Walmart's weighting will drop to 26 from 17. UnitedHealth Group will remain the most heavily weighted stock in the index. More here.

(More Dow Jones stories.)