It May Be Tech Sector’s Turn in Dow Index

A seat in a very exclusive club--the Dow Jones industrial average--will open up with the acquisition of Union Carbide by Dow Chemical.

Union Carbide has been one of the 30 stocks in the Dow index since 1928. Its merger into Dow Chemical means the editors of the Wall Street Journal, keeper of the Dow index, will have to pick a stock to replace it.

Inclusion in the fabled market barometer would be a coup for any company. Being a Dow stock establishes a company as a leader in its own industry and in the U.S. economy at large.

An obvious candidate would be Dow Chemical, which is not related to Dow Jones & Co., the Journal’s owner. Replacing Union Carbide with Dow Chemical would maintain a major presence for the chemical industry in the Dow index.

There is precedent for replacing an acquired Dow component with the merged company. That was done when Travelers Group bought Citicorp. The combined company, Citigroup, took Travelers’ place in the Dow.

But the Dow already includes DuPont, AlliedSignal, Eastman Kodak and Chevron, all of which have significant chemical operations.

Moreover, the Dow has come under fire over the years for failing to accurately reflect the transition in the U.S. economy from industrial to service to technology.

So speculation about Union Carbide’s replacement is turning to the technology sector.

“If I were doing it, I would want to reflect less the manufacturing, industrial element and more some of the newer companies, the more technologically oriented companies,” said William Freund, director of Pace University’s Center for the Study of Equity Markets.

Although the Dow includes IBM and Hewlett-Packard, neither of the two most highly valued technology companies--Microsoft and Intel--is in the index. Adding one of them also would give the Dow its first Nasdaq-listed stock. All 30 Dow stocks currently are New York Stock Exchange issues.

John Prestbo, markets editor of the Journal, suggested that all the Dow’s component stocks could come under scrutiny as the editors consider a replacement for Union Carbide.

“A potential change caused by an external event is always an occasion to review the Dow,” Prestbo said. “Adding a big technology company would be a possibility.”

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The Dow 30

Stocks that make up the Dow Jones industrial average:

Alcoa

AlliedSignal

American Express

AT&T;

Boeing

Caterpillar

Chevron

Citigroup

Coca-Cola

DuPont

Eastman Kodak

Exxon

General Electric

General Motors

Goodyear Tire

Hewlett-Packard

IBM

International Paper

Johnson & Johnson

McDonald’s

Merck

3M

J.P. Morgan

Philip Morris

Procter & Gamble

Sears Roebuck

Union Carbide

United Technologies

Wal-Mart

Walt Disney

Source: Dow Jones & Co.