Dow Jones Stock Market

The Dow Jones, Dow 30, or simply the Dow are common names that refer to the Dow Jones Industrial Average (DJIA), a well-known stock market index. The index is used by stock brokers, financial analysts, and investors as a means to gauge the daily performance of the stock market. Even though there are other indices used on Wall Street as well, the Dow Jones is one of the oldest and most widely tracked in US and around the world.

Interestingly, the Dow Jones was created in 1896, not by a Wall Street broker nor a financial expert, but by a journalist named Charles Dow. Charles Dow and Edward Jones, a business associate and statistician, published the index; and it was named after the two men.

The editors of the Wall Street Journal, a business newspaper owned by the Dow Jones Corporation, administer and select the companies for the index. Only blue-chip, highly traded, US based enterprises are eligible. The companies represent significant industry segments that make up the overall economy. The Dow uses a price-weighted average, based on the sum of the stock prices and an adjustable “Dow divisor.“

The Dow originally consisted of 12 major companies — ten railroads and two industrial firms. After several years, expansions were implemented. By 1916, the index was expanded to include 20 firms. Then again in 1928, the index was updated to include 30 companies. Even though some components have changed over time, the number 30 remains constant and continues today.

The most recent changes occurred in the midst of the current global economic crisis. During 2008-2009, five Dow companies suffered financial hardship. Consequently, AIG (American International Group), Altria (Phillip Morris), Honeywell, General Motors, and Citigroup were dropped. Kraft Foods, Bank of America, Chevron, Cisco Systems, and Travelers became the new additions.

A current Dow 30 listing, including the year of entry and industry type:

1) 3M (1976) – Conglomerate
2) Alcoa (1959) – Aluminum
3) American Express (1982) – Consumer finance
4) AT&T (1999) – Telecommunication
5) Bank of America (2008) – Banking
6) Boeing (1987) – Aerospace and defense
7) Caterpillar (1991) – Construction and mining equipment
8) Chevron Corporation (2008) – Oil and gas
9) Cisco Systems (2009) – Computer networking
10) Coca-Cola (1987) – Beverages
11) DuPont (1935) – Chemical industry
12) ExxonMobil (1928) – Oil and gas
13) General Electric (1907) – Conglomerate
14) Hewlett-Packard (1997) – Technology
15) Home Depot (1999) – Home improvement retailer
16) Intel (1999) – Semi-conductors
17) IBM (1979) – Computers and technology
18) Johnson & Johnson (1997) – Pharmaceuticals
19) JP Morgan Chase (1991) – Banking
20) Kraft Foods (2008) – Food processing
21) McDonald’s (1985) – Fast food
22) Merck (1979) – Pharmaceuticals
23) Microsoft (1999) – Software
24) Pfizer (2004) – Pharmaceuticals
25) Procter & Gamble (1932) – Consumer goods
26) Travelers (2009) – Insurance
27) United Technologies Corporation (1939) -Conglomerate
28) Verizon Communications (2004) – Telecommunication
29) Wal-Mart (1997) – Retail
30) Walt Disney (1991) – Entertainment and broadcasting