Feb. 11 (Bloomberg) -- Bank of America Corp. and Chevron Corp. will replace Altria Group Inc. and Honeywell International Inc. in the Dow Jones Industrial Average, the first changes in the U.S. stock benchmark since April 2004.

The revisions in the 111-year-old gauge were prompted by Altria's spinoff of Kraft Foods Inc. last March and the planned divestiture of its overseas tobacco unit next month, according to a statement today from Dow Jones Indexes, a unit of News Corp.

The addition of Bank of America, the biggest U.S. bank by market value, and Chevron, the country's second-largest fuel producer, reflect the growing importance of financial and energy companies in the U.S. stock market. Those industries represent a smaller slice of the 30-member Dow average than they do in the Standard & Poor's 500 Index.

``While people follow the S&P 500 to get a broad feel for the market, the Dow Jones is still the average people recognize,'' said Keith Wirtz, who oversees about $22 billion as chief investment officer of Fifth Third Asset Management in Cincinnati. The changes are ``an alignment of the average to reflect where earnings are emanating from in corporate America.''

The Dow, the oldest benchmark for U.S. stocks, is a so- called price-weighted measure. Companies with the highest share prices have the greatest influence on changes in the average.

Chevron, Bank of America

Chevron would have the fourth-largest weighting in the Dow average based on its closing price of $80.43 on the New York Stock Exchange today, according to data compiled by Bloomberg. Bank of America will be 19th-biggest, using today's closing price of $42.14. They will join the Dow industrials on Feb. 19.

International Business Machines Corp., the world's largest computer-services provider, has the largest weighting in the Dow after closing at $105.14.

Exxon Mobil Corp., currently the only energy company in the Dow average, made up 5.5 percent of the measure on Feb. 8, according to Bloomberg data. The energy industry represented 12.5 percent of the S&P 500.

Chevron, based in San Ramon, California, has been a member of the Dow average twice before, according to the statement from Dow Jones. The first stint was from February 1924 to August 1925, when the company was known as Standard Oil Co. of California. The company rejoined in 1930 and was removed in November 1999.

`Very Representative'

``I'm glad oil's back in there,'' said Neil Hennessy, president and portfolio manager at Hennessy Advisors Inc., which oversees $1.2 billion in Novato, California. ``That's very representative of what's happening not only in the U.S. but globally.''

Energy shares in the S&P 500 have been the top performers among 10 industries this decade, rising 153 percent. That compares with a 57 percent gain in raw-materials producers, the second-best performers. Crude oil futures reached a record $100.09 a barrel in New York on Jan. 3, an almost fourfold gain since the beginning of 2000. Futures rose 2 percent to $93.59 in New York today.

Chevron shares, which have gained 86 percent this decade, rose 1.5 percent today. Chevron's media relations office didn't return a message seeking comment.

Financial firms made up 11 percent of the Dow average and 18 percent of the S&P 500 as of Feb. 8, according to Bloomberg data. Bank of America will join American International Group Inc., Citigroup Inc., JPMorgan Chase & Co. and American Express Co. as industry representatives in the Dow.

Subprime Losses

The S&P 500 Financials Index lost 21 percent last year, the most since 1990, after the world's largest financial institutions reported more than $100 billion in asset writedowns and credit losses tied to the collapse of the subprime mortgage market.

``We're pleased with the recognition that Bank of America is viewed as an important company within the U.S. economy,'' said Scott Silvestri, a Bank of America spokesman.

Bank of America, which fell 23 percent last year, slipped 2 cents today. The Charlotte, North Carolina-based company's stock has climbed 68 percent this decade.

``It's not a matter of what's going on at the moment,'' John Prestbo, editor of Dow Jones Indexes, said during an interview with Bloomberg Television from the floor of the New York Stock Exchange. ``Financials have grown a lot over the past 25 years. We were a little bit light.''

Rupert Murdoch

News Corp., the New York-based media company controlled by Rupert Murdoch, purchased Dow Jones & Co., publisher of the Wall Street Journal, in December for $5.2 billion.

The Journal's managing editor, with the help of editors who run the paper's markets section, has typically reviewed and made decisions on what companies make up the index, said Norman Pearlstine, a former Journal managing editor, who is now a managing director at Washington-based buyout firm Carlyle Group.

Pearlstine, who left the Journal in 1992, worked with Prestbo when he was at the paper. Murdoch is unlikely to influence changes in the index, Pearlstine said during an interview Feb. 8.

``The great asset of the Dow Jones Industrial Average is its tenure, its length, its history,'' Pearlstine said. ``I can't imagine that he'd want to in any way manipulate or change it. Rupert Murdoch paid a lot of money for a very powerful asset, one of whose greatest attributes is its credibility.''

$1.2 Trillion

The S&P 500, whose history goes back to 1928, has replaced the Dow as the primary U.S. stock benchmark. About $53 billion is tied to the Dow average, according to Rebecca Patterson, a spokeswoman for Dow Jones Indexes. That compares with about $1.2 trillion that tracks the S&P 500, according to Howard Silverblatt, the New York-based senior index analyst at S&P.

S&P 500 members are weighted by market value. Exxon is the biggest, valued at $454.7 billion.

Omaha, Nebraska-based Berkshire Hathaway Inc., the fifth- largest U.S. company by market value, is the nation's biggest firm not in the Dow. Investor Warren Buffett's company has a value of $216.3 billion. Mountain View, California-based Google Inc., owner of the most popular Internet search engine, and San Jose, California-based Cisco Systems Inc., the biggest maker of networking equipment, are the next largest. Both exceed $140 billion.

Honeywell, the best performer in the Dow average last year and based in Morris Township, New Jersey, retreated 19 cents to $57.64 today. The world's largest maker of aircraft controls was removed from the Dow because the role of industrial companies in the U.S. stock market has declined in recent years, and Honeywell had the smallest revenue and earnings among the gauge's members, according to the Dow Jones statement.

``We are confident that our strong and growing track record of financial performance, effective cash deployment, and our great positions in good industries will continue to be recognized by investors globally,'' Honeywell spokesman Rob Ferris wrote in an e-mail.

General Electric

Altria, based in New York, lost 67 cents to $72.42. The company will spin off its overseas unit on March 28. Spokeswoman Lisa Gonzalez declined to comment.

The Dow average gained 0.5 percent to 12,240.01. The S&P 500, whose members have a median market value of $11.8 billion, increased 0.6 percent to 1,339.13.

American International Group Inc., Verizon Communications Inc. and Pfizer Inc. are the most recent additions to the Dow, having joined in April 2004.

The original Dow Jones average, published in 1896, contained 12 stocks, including General Electric Co., which is the only stock to have been in the benchmark for its entire history. Dow Jones increased the number of stocks in the average to 30 in 1928.

To contact the reporter on this story: Michael Patterson in New York at mpatterson10@bloomberg.net.

Last Updated: February 11, 2008 17:10 EST