Please ensure Javascript is enabled for purposes of website accessibility

Why Amgen Stock Vaulted Higher Today

By Keith Speights – Aug 25, 2020 at 3:45PM

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 company is set to become the first biotech included in the Dow Jones Industrial Average.

What happened

Shares of Amgen (AMGN -0.40%) were vaulting 5.9% higher as of 3:21 p.m. EDT on Tuesday. The nice jump came after the announcement that the stock would be added to the Dow Jones Industrial Average, replacing Pfizer

So what

There are two main reasons why investors cheered today's news for Amgen. One was more symbolic, while the other was quite practical.

Dow in green letters in a green circle with three small green arrows pointing up

Image source: Getty Images.

The addition of Amgen to the Dow Jones index was symbolically a significant kudo for the company. Amgen will become the first biotech stock to ever be included in the prestigious index. Becoming part of the Dow Jones Industrial Average reflects Amgen's accomplishments in establishing itself as a major player in the healthcare sector.

There's also a practical and tangible benefit from Amgen's inclusion in the Dow. Several mutual funds and exchange-traded funds (ETFs) track the Dow Jones Industrial Average. These funds will buy shares of Amgen, potentially driving the stock higher in the process.

Now what

Amgen won't officially become part of the Dow Jones index until Aug. 31, 2020. While the stock's addition to the index will provide a temporary boost, the more important thing to focus on will continue to be Amgen's pipeline progress. The biotech expects to announce key results from late-stage studies for two candidates later this year, tezepelumab in treating asthma and omecamtiv mecarbil in treating heart failure.

Keith Speights owns shares of Pfizer. The Motley Fool recommends Amgen. 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

Amgen Stock Quote
$282.62 (-0.40%) $-1.12
Pfizer Stock Quote
$49.57 (0.73%) $0.36

*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
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/28/2022.

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.