Dow Jones Index

Dow Jones Index, also known as the Dow Jones Industrial Average (DJIA), or often simply the Dow 30 Industrials, is a price-weighted average of 30 U.S. blue-chip stocks. These are shares of some of the largest and most financially strong and stable companies in the United States. As the second-oldest continuing U.S. stock market index, it remains one of the most widely reported indicators of the price performance of U.S. equities.

The index was originated by Charles Dow (18511902), one of the founders of Dow Jones and Company, who began publishing the daily average prices of 12 “industrial” stocks in The Wall Street Journal in 1896. In 1916 the index sample was increased to 20 stocks, and then in 1928 to 30 stocks, where it has remained to the current day. In 1956 the DJIA became the first stock index to be made available in real time during trading hours.

In 1884 Dow began publishing an earlier index of 11 primarily railroad stocks that was published in Customer's Afternoon Letter, a precursor to The Wall Street Journal. In 1896 the last non-railroad stock was removed from this index, which became a 20-stock average of railroad stocks. As a result of the change in its composition over the years, this index was renamed the Dow Jones Transportation Average (DJTA) in 1970.

The DJTA has the distinction of being the U.S. oldest continuing stock market index. Also among the most commonly referenced Dow stock indices is the Dow Jones Utility Index (DJUA), which was established in 1929 and includes 15 large natural gas and electricity utilities. Together these three indices and their combined 65 stocks comprise the Dow Jones Composite Average. Reportedly, Dow's goal in publishing stock indices was to provide market participants measures of longer-term trends in stock prices that minimized the import of daily, random price fluctuations.

Composition

The composition of the Dow 30 is determined by the editors of The Wall Street Journal. Changes are infrequent and are usually driven by a change to one of the component companies, such as its acquisition or a significant change in its business. Whenever a change is required, all component stocks are reviewed. Historically, the DJIA index's composition has been less “industrial” than its name suggests. Reportedly, the editors look to include large successful companies whose shares are widely held and are not represented in the separate indices for both transportation and utility companies. In general, the composition of the DJIA index has changed to reflect the changing American economy as it has developed over the past century from the dominance of agricultural and commodity production to leadership from such sectors as technology, retail, and financial. These changes are reflected in the original and recent lists of companies included in the index.

In 1896 the DJIA originally consisted of the following 12 companies: American Cotton Oil; American Sugar; American Tobacco; Chicago Gas; Distilling & Cattle Feeding; General Electric; Laclede Gas; National Lead; North American; Tennessee Coal & Iron; U.S. Leather (preferred); and U.S. Rubber. Among these companies in the original index, only General Electric remains on the current DJIA. (However, General Electric has not been in the index continuously; it was not included from 1898 to 1899 or from 1901 to 1907.)

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