September 10, 2013 The Portland Business Journal

By Matthew Kish

Why Nike Being Added to the Dow Matters

Washington County footwear giant Nike is the newest addition to the Dow Jones Industrial Average, the most widely-followed benchmark of the health of the stock market and U.S. economy.

The index includes 30 of the country's biggest blue-chip companies.

"It’s an honor to Nike," said Ralph Cole, senior vice president of research at Portland-based Ferguson Wellman Capital Management.

Goldman Sachs and Visa also will be added. Alcoa, Hewlett-Packard and Bank of America will be dropped.

"There's definitely a prestige factor and a sense that Nike is a large enough, stable enough company that it represents the overall economy and the market," said Sara Hasan, an analyst with McAdams Wright Ragen in Seattle who follows Nike.

As expected, Nike's stock (NYSE: NKE) climbed on the news. Many mutual funds buy the stocks of the companies in the Dow. It was up nearly 2 percent to $66.55 in mid-day trading.

"It generates a little buying power initially as the index needs to rebalance," said Blake Howells, vice president at Portland-based Becker Capital Management Inc. "But longer term the driver of stock prices is fundamentals."

The stock's average trading volume also will likely go up, which could lead to increased volatility.

"(The companies in the Dow) are the vehicles that hedge funds and even retail investors use to get in and out of the market quickly," Cole said.