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History of the Dow

The history of the Dow Jones Industrial Average, or DJIA, goes back to May 26, 1896.  Charles Dow, Wall Street Journal editor and founder of Dow Jones and Company, first compiled and published the average as an indicator of stock market performance.

Original Components of the Dow

When first published, the original components, or member companies, of the Dow Jones Industrial Average included "smokestack" companies across a range of industries.  Of the original twelve companies that made up the Industrials back in 1896, only General Electric is still part of the Index.  The other eleven companies included:

  • Additional Resources
    American Cotton Oil - Predecessor of Bestfoods
  • American Sugar -  Evolved into Amstar Holdings
  • American Tobacco - Broken up in 1911 by antitrust actions
  • Chicago Gas - Now part of Peoples Energy
  • Distilling & Cattle Feeding - Evolved into Millennium Chemicals
  • Laclede Gas - Still in operation as Laclede Group
  • National Lead - Now known as NL Industries
  • North American - Utility broken up in the 1940s
  • Tennessee Coal, Iron and Railroad Company -  Bought by U.S. Steel
  • U.S. Leather - Dissolved in 1952
  • U.S. Rubber - Now part of Michelin

Dow Jones Indexes

The original components of the Dow Jones Industrials have changed over the years, and the index no longer represents companies that are in strictly agricultural and "heavy industries" such as tobacco, sugar, iron, leather, and rubber.  As the U.S. economy has grown to rely on non-industrial sectors, greater emphasis has been placed on companies providing financial services, retailing, and technology.

The first Dow Jones Index to be introduced was the Industrial Average, which was initially published on May 26, 1896.  Leveraging the popularity and success of the industrials, Charles Dow later introduced the Dow Jones Transportation Average on October 26, 1896, and the Dow Jones Utility Average on January 2, 1929.

Dow Jones Industrials

Today, the Dow Jones Industrial Average consists of 30 companies that are thought to best mirror the U.S. economy.  Representative companies of the Industrials include 3M, Caterpillar, The Home Depot, JPMorgan Chase, Microsoft, McDonalds and NIKE.  The Dow is normally quoted as an index.  This means the stock price of each company is multiplied by a weighting factor to derive the composite index number.

By using an index, and introducing a weighting into the formula, companies can be inserted into the average without disrupting the historical movement of the index.  A complete listing of the industrial companies and their weightings can be found here:  Dow Jones Industrials.

Dow Jones Transportation

The Dow Jones Transportation Index consists of 20 companies that provide transportation services including rail, trucking, airlines, and automobiles.  Representative companies in the Index include CSX Corp., FedEx Corporation, Overseas Shipholding Group, Southwest Airlines, and Ryder System, Inc.  Just like the Industrials, each component or company in the Transportation index has a weighting.  A complete list of the index can be downloaded here:  Dow Jones Transportations.

Dow Jones Utility

The last of the Dow indexes to be introduced, the Dow Jones Utility Average, consists of 15 companies providing electricity and natural gas to consumers across the United States.  Representative companies in the Index include Consolidated Edison, Exelon, Southern Company, and Williams Cos.  A complete list of the index can be downloaded here:  Dow Jones Utilities.

History of the Average

Perhaps one of the most interesting aspects of the Dow's history is the time it took to reach 1,000 point milestones.  When the index was first introduced, it stood at 40.94, and it took roughly 76 years to reach the 1,000 mark.  As of this writing (July 2014), the Dow has not hit the 18,000 mark.

The complete milestone history of the average appears in the table below:

DJIA Milestones

Milestone

Date

Time

1,000 November 14, 1972 76 Years
2,000 January 8, 1987 14 Years
3,000 April 17, 1991 4 Years
4,000 February 23, 1985 4 Years
5,000 November 21, 1995 9 Months
6,000 October 14, 1996 11 Months
7,000 February 13, 1997 4 Months
8,000 July 16, 1997 5 Months
9,000 April 6, 1998 9 Months
10,000 March 29, 1999 12 Months
11,000 May 3, 1999 1 Month
12,000 October 19, 2006 7 Years, 5 Months
13,000 April 25, 2007 6 Months
14,000 July 17, 2007 3 Months
15,000 May 7, 2013 5 Years, 10 Months
16,000 November 18, 2013 6 Months
17,000 July 3, 2014 8 Months
18,000    

The Dow at 12,000

Moving the DJIA from the 11,000 to 12,000 mark seemed impossible until October 19, 2006, when the Dow broke through a 1,000 point milestone for the first time in the 21st century.  This milestone represented a 1,000 point move in the index, but was only a 9.1% increase in the average.  Seven years was a long time to reach this milestone, especially when compared to the 14 years it took to move from 1,000 to 2,000, which was a 50% increase in the average over that timeframe.  Our article on the Dow at 12,000 contains additional information on this important and historical achievement.


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