In the years since the Dow Jones Industrial Average (DJIA) was first introduced on May 26, 1896, it has been regularly quoted in news broadcasts, newspapers, and journals as an indicator of financial markets and economic conditions in the United States. Surprisingly, however, although the DJIA is the best known, it was not the first of the Dow indexes.
Dow Jones & Company was formed in 1882 by Charles H. Dow, a journalist formerly of the Kiernan News Agency, and Edward Jones formerly of the Providence Star. The first Index was created in 1884 and was originally known as the Dow Jones Railroad Average; it consisted of 11 stocks, including the New York Central and Union Pacific, and two non-rails, Pacific Mail Steamship and Western Union. It was published in the Customer's Afternoon Letter, a daily financial news bulletin which was the precursor to The Wall Street Journal. The name changed in 1970 to the current Transportation Average.1
The first calculation of the DJIA was comprised of stocks of twelve different companies in the industrial sector. The average started at 40.94 points. These companies were selected specifically to represent major areas of the U.S. economy following the recession in the late 1800s. Companies included in Dow’s original calculations were:2
- American Cotton Oil Company
- American Sugar Company
- American Tobacco Company
- Chicago Gas Company
- Distilling & Cattle Feeding Company
- General Electric
- Laclede Gas Company
- National Lead Company
- North American Utility Company
- Tennessee Coal & Iron
- U.S. Leather Company (preferred)
- U.S. Rubber Company
By 1916 the number of stocks rose to 20 and again rose to 30 in 1928.3 It crossed the 1000 mark on November 14, 1972 and it reached 10,000 on March 29, 1999. Throughout most of its history, the stocks on the Index have been listed on the New York Stock Exchange, but in 1999 Microsoft and Intel (which were listed on the NASDAQ), were included. While General Electric is the only one of the original 12 stocks that is still listed (although it was removed and reinstated twice), many of the other original 12 have merged into other companies, which are included in the DIJA.4
Dow's editorials, published in the Wall Street Journal from 1899 to 1902, provided insight into the foundations of the DJIA and other Dow indices. His work was originally intended to create a "window" into the market and economy versus as opposed to developing a "formal theory" of market movements however, Dow's works and ideas eventually evolved with contributions from his colleagues and became known posthumously as "Dow Theory."5 Although the Dow Theory has been expanded and modified over time, and the DJIA has encountered criticisms, Dow's work remains an important and widely known indicator of the strength of the nation's productivity and economy.
As of this writing, S&P Dow Jones Indices is the current owner of the Dow Jones Industrial Average. The Dow Jones Industrial Average is now comprised of thirty (30) major American publicly traded companies. Components of the DJIA are continually revised to reflect corporate industry in the United States.
