Please ensure Javascript is enabled for purposes of website accessibility

Dow Jones Sinks After Big Changes Announced; Apple Stock Down on Mixed "Fortnite" Ruling

By Timothy Green - Aug 25, 2020 at 12:54PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Dow will gain some new members at the end of the month, and Apple won't be able to completely bar Epic Games from its platforms.

The Dow Jones Industrial Average (^DJI 0.04%) declined on Tuesday, underperforming the other major U.S. stock indices by wide margins. The Dow was down about 0.63% at 12:05 p.m. EDT after the company behind the index announced some major changes in response to Apple's (AAPL -0.25%) decision to split its stock.

Apple stock was down on Tuesday after a judge delivered a mixed ruling related to the company's battle with Epic Games. Once Apple's stock split is executed, the high-flying tech stock will have less of an impact on the Dow, since the index is weighted by stock price.

A Wall Street street sign.

Image source: Getty Images.

The Dow gets a makeover

Apple's decision to split its stock will have a significant impact on the Dow. On Monday, S&P Global announced some changes to the Dow that will help offset the effect of Apple's split. Effective Aug. 31, Salesforce.com (CRM 0.35%) will replace ExxonMobil (XOM 0.84%), Amgen (AMGN -0.54%) will replace Pfizer (PFE -0.45%), and Honeywell International (HON 0.66%) will replace Raytheon Technologies (RTX -2.15%).

This move will lower the Dow's weighting toward the energy industry, which has been hit hard by the pandemic, while offsetting the lower weighting toward the tech industry that Apple's split will cause. It will also replace three poorly performing stocks with stocks that have better records in recent years.

CRM Chart

CRM data by YCharts.

The addition of Salesforce, a software-as-a-service pioneer founded in 1999, is the most notable change. Salesforce will report its second-quarter results after the market closes today. Analysts are expecting 22% revenue growth and adjusted earnings that are roughly unchanged from the prior-year period. Shares of Salesforce were up around 3.7% by early afternoon.

Judge allows Apple's Fortnite ban, saves Unreal Engine

Popular game Fortnite will remain absent from Apple's App Store after a judge denied Epic Games' request for a restraining order. Judge Yvonne Gonzalez Rogers called Epic Games' decision to offer direct payments a calculated move to breach Apple's policies.

While Apple's Fortnite ban was sustained, the company's threat to cut off Epic Games from its development tools was shot down. Epic Games is responsible for the Unreal Engine, a popular game engine used in a wide variety of games across most major platforms. If Epic Games were unable to support Unreal Engine for Apple's platforms, it would create havoc for any developer using the engine and targeting iOS.

The judge concluded that Apple's actions related to the Unreal Engine were retaliatory and that they could damage the platform and the gaming industry. That view lines up with the argument Microsoft made over the weekend.

This battle over Apple's App Store fees is far from over. There's no question that Epic violated Apple's policies; the issue is whether those policies are anticompetitive. Apple has complete control over how apps are acquired on its iOS platform, and it requires developers to use its in-app purchase system and pay a fee on all purchases. European Union antitrust regulators started formal investigations in June.

Shares of Apple were down 1.7% by early Tuesday afternoon. The stock is still up about 68% year to date.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Timothy Green has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple, Microsoft, and Salesforce.com. The Motley Fool recommends Amgen and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
$164.93 (-0.25%) $0.42
Pfizer Inc. Stock Quote
Pfizer Inc.
PFE
$49.05 (-0.45%) $0.22
Exxon Mobil Corporation Stock Quote
Exxon Mobil Corporation
XOM
$89.19 (0.84%) $0.74
Salesforce, Inc. Stock Quote
Salesforce, Inc.
CRM
$190.84 (0.35%) $0.67
Raytheon Technologies Corporation Stock Quote
Raytheon Technologies Corporation
RTX
$91.03 (-2.15%) $-2.00
Honeywell International Inc. Stock Quote
Honeywell International Inc.
HON
$193.53 (0.66%) $1.26
Amgen Inc. Stock Quote
Amgen Inc.
AMGN
$244.93 (-0.54%) $-1.32
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$32,815.90 (0.04%) $12.43

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
377%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/08/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.