When nightly news reporters state that the stock market rose 100 points, or fell by 1.5 percent, they are generally referring to the Dow Jones Industrial Average rather than to the performance of the stock market as a whole. The Dow Jones Industrial Average, commonly called the Dow, is an index of large, well-known, stable companies, known as blue-chip companies, that are publicly traded on the stock exchange. The Dow is a mix of companies from several industry sectors, with some sectors, such as technology, more heavily represented than others. Changes in the value of the Dow are an indication of the performance of the overall stock market as well as the national economy.
Dow Jones Industrial Average
The Dow is a benchmark index that tracks the performance of 30 major companies. The Dow, created in 1896, is one of the oldest stock market indexes with a continuous record. As of January 2012, the total market capitalization of the companies in the Dow, which includes many of the nation's largest corporations, was $3.78 trillion. Individual company values ranged from a high of $401 billion to a low of $10.8 billion.
Companies are added to or removed from the Dow Jones Industrial Average as corporate fortunes change and corporate identities disappear due to bankruptcies, mergers, divestments or acquisitions. The Dow's component stocks, as of February 2012, included materials and energy companies, such as Alcoa, Du Pont, Chevron and Exxon; technology firms, including Cisco, IBM, Microsoft and Intel; food and beverage companies such as Kraft Foods, Coca-Cola and McDonald's; financial and insurance firms, including Bank of America, American Express and Travelers. Several other sectors are included as well, in addition to conglomerate companies such as General Electric, which has business operations in many sectors.
Dow Jones Indexes, the company that manages the Dow Jones Industrial Average, divides the Dow into discrete sectors. In January 2012, industrials, technology and consumer services were the three largest sectors of the Dow, accounting for 22, 18 and 15 percent, respectively, of the overall index. Oil and gas, consumer goods and financials occupied the middle tier (11, 10 and 9 percent, respectively), while health care, telecommunications and basic materials accounted for the three smallest sectors, each accounting for less than 8 percent of the total value of the Dow.
Dow Jones Indexes publishes many other indexes besides the Dow Jones Industrial Average, including indexes designed to track the performance of individual sectors of the economy. In February 2012, the company published about 30 sector indexes, including the Dow Jones Transportation Average, the Dow Jones Utility Average and indexes tracking insurance, metals and mining, aerospace and defense, home builders, pharmaceuticals, oil exploration and investment services.
- Yahoo! Finance: Dow Jones Industrial Average Components
- The Wall Street Journal. "The Beginning: 1882-1899." Accessed July 23, 2020.
- The Library of Congress. "Dow Jones Industrial Average First Published." Accessed July 23, 2020.
- S&P Dow Jones Indices. "The Evolution of the Dow." Accessed July 23, 2020.
- S&P Dow Jones Indices. "Dow Jones Transportation Average." Accessed July 23, 2020.
- S&P Dow Jones Indices. "Dow Jones Utility Average." Accessed July 23, 2020.
- PR Newswire. "The McGraw-Hill Companies, CME Group Announce the Launch of S&P Dow Jones Indices." Accessed July 23, 2020.
- S&P Dow Jones Indices. "S&P 500." Accessed July 23, 2020.
- Nasdaq. "Nasdaq Composite." Accessed July 23, 2020.
David Sarokin is a well-known specialist on Internet research. He has been profiled in the "New York Times," the "Washington Post" and in numerous online publications. Based in Washington D.C., he splits his time between several research services, writing content and his work as an environmental specialist with the federal government. David is the author of Missed Information (MIT Press, 2016), a book exploring how better information can lead to a more sustainable future.