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Stock Index Drops AIG

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Kraft Foods Inc. will replace American International Group in the Dow Jones Industrial Average Monday, the publisher of the average says.

The change was prompted by the Federal Reserve System’s move to acquire 79.9% of AIG in return for a 2-year, $85 billion loan.

The composition of the DJIA index was last changed in February, when Bank of America Corp., Charlotte, N.C., and Chevron Corp., San Ramon, Calif., replaced former Kraft parent Altria Group Inc., Richmond, Va., and Honeywell International Inc., Morris Township, N.J.

AIG has been in the DJIA index since April 1, 2004.

The change was “forced by the effective nationalization of AIG and its very low stock price,” says John Prestbo, editor of the Dow Jones Indexes.

“We are refraining at this point from adding another stock in the financial industry because of the extremely unsettled conditions,” says Robert Thompson, managing editor of The Wall Street Journal. “We realize this decision leaves the Dow Jones Industrial Average under-weighted in financials, and we will address this situation in due course.”