What Does the Dow Number Mean?
by William Lynch
The Dow Jones industrial average, often known simply as the Dow, is a collection of 30 key stocks selected to represent the strength of the stock market, which is a leading indicator of the U.S. economy.
Fact
The Dow number is the average value of the 30 chosen stocks. However, the number is not given in dollars. Instead, the Dow number is a level relative to a base value.
Features
The Dow Jones industrials include such important stocks as General Electric, Exxon Mobil, McDonald’s, and 3M.
Function
The Dow may rise or fall depending on the performance of the stock market. Investors monitor how much the Dow moves in any given day to determine the health of the market and the overall U.S. economy.
Significance
A high, climbing Dow number means the stock market is strong. A falling Dow number indicates the economy is struggling and may inspire fear and uncertainty in investors.
Use
Investors use the Dow to determine how the market did each day. The Dow level can be compared against past performance to gauge overall market strength.
History
Charles Dow and Edward Jones first published the Dow Jones industrial average in 1896.
References
Photo Credits
- Image by Fotolia.com, courtesy of Stasys Eidiejus