Bank of America and Chevron to join Dow

The oil major Chevron and Bank of America, the US giant that bought ABN Amro's LaSalle business over the protestations of Royal Bank of Scotland last year, will become the newest members of the Dow Jones Industrial Average this month in the first shake-up of the benchmark US index in nearly four years.

John Prestbo, the editor of Dow Jones Indexes, said the changes to the world's oldest industrial index came after a restructuring at Altria, the tobacco giant formerly known as Philip Morris, led to a review of of its component members.

As of next Tuesday, Altria, which spun off its Kraft Foods unit last year and which will divest its foreign tobacco operation next month, and Honeywell Inter-national, the industrial conglomerate, will drop out of the index. In their place will be Chevron and BofA.

Mr Prestbo said that since the Second World War, changes to the 30-member index have occurred at an average of about every two years.

He said that BofA was chosen because the index was still underweight onfinancials and that the company's focus on retail banking, as opposed to investment banking and trading, gave it a "different dimension" to other financial members such as Citigroup and American Express.

The ascension of Chevron will mark its third stint on the index. It first became a member as Standard Oil in 1924 before being dropped a year later. It resumed its place in 1930 and remained there until 1999, when Micro-soft and Intel became the first Nasdaq-listed technology companies to make it to the list.

Seen as the face of the US stock market since it was created in 1896, the Dow remains a yardstick by which the health of the world's largest economy is measured. But some dismiss it as an anachronism that fails to reflect the breadth of the American stock market.

Critics point out that 30 members are far too few to be a useful reflection of an economy that has grown and changed so signific-antly since it was created. The index has also been criticised because determining membership is a little understood process that is the ultimate decision of the managing editor of The Wall Street Journal, in this case Marcus Brauchli.

Mr Prestbo said that the argument that the Dow was irrelevant was "baloney", as it has had a near-perfect correlation with the much larger S&P 500 index.