The Dow Just Announced Its Biggest Shake-Up Since 2013

 

Plus, the FDA Commissioner is walking back comments on the benefits of convalescent plasma, American Airlines announced it is laying 19,000 workers, and Best Buy shares are down even after reporting a great quarter.

Stocks were lower to start Tuesday with the Dow falling 150 points, or 0.5%. The S&P 500 and Nasdaq both traded just below the flatline.

Big changes are coming to the Dow Jones Industrial Average. Exxon, Pfizer, and Raytheon are out, and Salesforce, Amgen, and Honeywell are in. The shake-up was prompted by Apple’s 4-for-1 stock split decision, which will significantly reduce the benchmark’s exposure to the information technology sector. “Basically Apple—by itself—took the technology [weighting] within the Dow down from 27.6% to 20.3%. It’s a significant decline,” said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. “By adding Salesforce, you can come back to 23.1% of the Dow being in technology.” Raymond James said Exxon’s removal from the index after 92 years is a “sign of the times,” as the company and energy sector falters as technology names gain strength. “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,” said Raymond James analyst Pavel Molchanov in a note to clients. “This represents a combination of the obviously rough COVID-impacted oil price backdrop but also concerns about the eventual peak in oil demand (which had emerged long before COVID) and ESG-related objections to fossil fuels generally.”

Blood plasma may not be the silver bullet it was made out to be. FDA Commissioner Stephen Hahn is walking back comments on the benefits of the treatment that was given emergency use authorization this past weekend, and said he could have done a better job of explaining the data on its effectiveness against the coronavirus. “I have been criticized for remarks I made Sunday night about the benefits of convalescent plasma,” Hahn said in a tweet. “The criticism is entirely justified. What I should have said better is that the data show a relative risk reduction not an absolute risk reduction. The authorization of emergency use of convalescent plasma is not a final approval. FDA will continue to monitor its use and will revoke authorization if needed. We feel broader use of plasma will truly benefit many patients but will require further study.” On Sunday, Hahn had said that the convalescent plasma treatment could save huge numbers of lives.

AstraZeneca said it has begun testing an antibody-based cocktail for the prevention and treatment of COVID-19, adding to recent signs of progress on possible medical solutions to the disease caused by the novel coronavirus. The study will evaluate if AZD7442, a combination of two monoclonal antibodies (mAbs), is safe and tolerable in up to 48 healthy participants between the ages of 18 and 55 years. If the antibody cocktail proves safe, AstraZeneca said it will proceed to test it as both a preventative treatment for COVID-19 and as  a medicine for patients who have the disease, in larger, mid-to-late stage studies. “This combination of antibodies, coupled to our proprietary half-life extension technology, has the potential to improve both the effectiveness and durability of use in addition to reducing the likelihood of viral resistance,” said Astra’s executive vice president of biopharmaceuticals R&D Mene Pangalos.

American Airlines shares are down more than 4% this morning after the airline said it will cut 19,000 employees in October when federal aid that protected those jobs expires and the coronavirus pandemic continues to kill travel demand. “We have come to you many times throughout the pandemic, often with sobering updates on a world none of us could have imagined,” American Airlines CEO Doug Parker and its president Robert Isom wrote in a staff note announcing the cuts. “Today is the hardest message we have had to share so far – the announcement of involuntary staffing reductions effective Oct. 1.” Delta also said today that it will furlough 1,941 of its pilots in October unless it can reach a cost-cutting agreement with the employees’ labor union. “We are six months into this pandemic and only 25% of our revenues have been recovered,” said John Laughter, Delta’s senior vice president of flight operations in a memo to pilots, adding that the airline doesn’t expect a quick rebound in demand. “With approximately 11,200 active pilots still on the roster following the September 1 [voluntary early retirement] departures, we are simply overstaffed, and we are faced with an incredibly difficult decision.”

And Best Buy shares are down this morning even after the electronics retailer delivered a great quarter. Best Buy said online sales jumped 242% year-over-year in the U.S. as customers bought computers, kitchen appliances, and other tech to help them work, cook, and attend school at home amid the coronavirus pandemic. Despite this, shares took a hit as the company declined to provide an outlook for its future results. “Overall, as we plan for the back half of the year, we continue to weigh many factors, including potential future government stimulus actions, the current shift in personal consumption expenditures from areas like travel and dining out, the possible depth and duration of the pandemic, the risk of higher unemployment over time, and the availability of inventory to match customer demand,” said Best Buy CFO Matt Bilunas.

Stocks We’re Watching

Arrow Electronics (NYSE: ARW): Arrow Electronics announced last week that it was introducing the Automotive High Voltage Evaluation Platform (AHVEP), offering developers an extensive range of tools with which to explore the latest trends in electrification of vehicles by providing a universal platform for applications and design challenges associated with high voltage power distribution network in cars. “Arrow’s AHVEP offers automotive developers a powerful tool with extensive capabilities,” said Michael Stoever, Arrow’s sales director for automotive in the EMEA region. “Vehicle powertrain electrification is the key industry trend currently, and this evaluation platform is able to address all levels of application, from 48V mild hybrid and plug-in hybrid electric vehicles, right up to 400V EVs.”

 
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