S&P Dow Jones Indices replaced the 92 years old Exxon Mobil at the biggest benchmark change in 7 years, announced Monday.
The company has been a part of Dow Jones since 1928 and served as one of the longest-serving companies in the history of the index. But a software stock replaced the energy giant after years of strong performances, according to the news.
Exxon was one of the most valuable companies even in 2013. The market value of the company topped $446 billion in 2014 outperforming any other companies at that time.
“In removing Exxon from the DJIA, the index provider is clearly being reactive, and indeed accentuating the extremely negative investor sentiment on just about anything tied to oil and gas.”
-Raymond James’ Pavel Molchanov wrote in a note to clients.
However, in the last five years, Exxon started to show signs of weakness as the entire energy sector was going down for years. Raymond James used the term, “sign of the times.”
Exxon Mobil shares dropped 3% on Tuesday as the news ignited a buzz in the markets.
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What happened to Exxon Mobil?
The removal of Exxon Mobil was a significant event in the history of Dow Jones. Even in 2013, Exxon used to rule the S&P 500 index as the largest publically traded company in the U.S.
10 years ago, the energy sector was 10.89% of the S&P 500 which is now only 2.5%. At the same time, the tech industry jumped to 28.17%. The five tech giants- Apple, Microsoft, Amazon, Alphabet, and Facebook- are now individually larger than the entire U.S energy stocks.
So a faint industry performance and weaker strategic position mainly contributed to the removal of Exxon from the Dow Jones Indices.
Furthermore, oil demand depleted during the Coronavirus Pandemic in 2020. The oil prices dropped to -$37 per barrel in April 2020. The average price was $3 per barrel in June 2020, according to the latest reports.
Under the circumstances, Exxon which lost 40% in the last five years was replaced by Salesforce. Exxon executives responded to the situation and claimed that it will not affect the operation of the company at any cost.
This action does not affect our business nor the long-term fundamentals that support our strategy. Our portfolio is the strongest it has been in more than two decades, and our focus remains on creating shareholder value by responsibly meeting the world’s energy needs. – Exxon Mobil.
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