On this day in economic and financial history …
The Dow Jones Industrial Average made a big change on March 17, 1997. Four companies exited that no longer exist in the same form today — Texaco (absorbed), Woolworth (changed name and business model), Westinghouse (also changed name and business model), and Bethlehem Steel (went bankrupt) — were removed. All four were longtime components. Bethlehem Steel, the “newcomer,” had been a member since 1928, and gray-haired Texaco was the earliest of the foursome to join, becoming the last addition of the 12-member Dow in 1915. In place of these stalwarts, the Dow’s overseers added Hewlett-Packard Company (NYSE:HPQ) , Johnson & Johnson (NYSE:JNJ), Travelers Companies Inc (NYSE:TRV), and Wal-Mart Stores, Inc. (NYSE:WMT).
Three of the four new additions have remained in the Dow ever since. Travelers was out in the next Dow shift as a consequence of its historic merger with Citigroup Inc. (NYSE:C) , which brought Citi into the index as a replacement. Travelers managed to regain its spot on the Dow in 2009, after Citi spun off the insurance giant in 2002 and then nearly collapsed during the financial crisis. Here’s how the foursome has performed in the 15 years since they were first added, against the performance of the Dow itself:
Dow Jones Industrial Average: 109%
HP total return: 23%
Wal-Mart total return: 523%
Johnson & Johnson total return: 291%
Dow return until Citigroup removal: 26%
Citigroup total return (to 2009 removal): (71%)
Dow return, Travelers reinstatement to 15-year anniversary: 66%
Travelers total return since 2009 reinstatement: 107%
Travelers hypothetical 15-year total return: 262%
The 1997 shift turned out to be rather hit and miss, but the Dow rarely has perfect timing. The 1997 replacements have more going for them, thanks to Wal-Mart and J&J’s outperformance, than an ill-considered tech-heavy shift made in 1999 at the very height of the dot-com bubble.
Hewlett-Packard Company (NYSE:HPQ) joins the Big Board
Hewlett-Packard moved on up in a different way decades before it joined the Dow, as its stock began trading on the New York Stock Exchange on March 17, 1961. This was four years after the company’s successful IPO and was later recounted by co-founder David Packard in his book The HP Way:
The first day of our public listing on the New York Stock Exchange did not start smoothly. A few of us flew to New York the day before the event and stayed uptown at the Essex House. Early the next morning, we set off for Wall Street. It never occurred to me to take a taxi; instead, we jumped on the BMT subway and headed downtown. Unfortunately, I wasn’t much of a subway navigator; after much debate, we made the wrong connection at Times Square. We arrived at Wall Street several minutes late and were immediately ushered into a huge corner office and greeted by the chairman of the exchange, Keith Funston. He chuckled when I explained that we’d gotten lost on the subway. I don’t think he could fathom that we would take the subway to such an important event. But we did!
Those wacky tech executives!
The beginning of the end for the gold standard
A panic in the international gold market forced a coalition of seven leading countries to abandon purchases of gold on the open market on March 17, 1968. In place of the earlier floating-price system, the United States and six European allies adopted a two-tiered price structure for the precious metal, which fixed international government-supported transactions at a price of $35 per ounce, while “unofficial” sales were allowed to operate on prevailing market prices. “Monetary” gold, that which backed the currencies of the seven nations, would only be bought and sold privately between the nations as a means of settling international debts.
A number of financial authorities condemned the move. Sidney Homer of Salomon Brothers called it “a financial Pearl Harbor” that signaled the United States had “lost [the] fight to preserve the worldwide convertibility of the dollar.” Princeton economist Fritz Matchlup warned that the coalition would “have to arrive at some sort of further agreement to prevent governments holding dollars from cashing them in” and added that “if the two-market system is going to work, there will have to be further arrangements, or even our friends will be lined up for our gold.”