THE DOW JONES INDUSTRIAL AVERAGE

Money makes the world go around

 

 

 

The Dow Jones Industrial Average (NYSE: DJI) is one of several stock market indices created by Wall Street Journal editor and Dow Jones & Company founder Charles Dow. Dow compiled the index as a way to gauge the performance of the industrial component of America's stock markets. It is the oldest continuing U.S. market index.

 

Today, the average consists of 30 of the largest and most widely held public companies in the United States. The "industrial" portion of the name is largely historical - many of the 30 modern components have little to do with heavy industry. To compensate for the effects of stock splits and other adjustments, it is currently a weighted average, not the actual average of the prices of its component stocks.

 

 

History

 

First published on May 26, 1896, the DJIA represented the average of twelve stocks from various important American industries. Of those original twelve, only General Electric remains part of the average. The other eleven were:

 

  • American Cotton Oil Company, a predecessor of Bestfoods, now part of Unilever

  • American Sugar Company, now Amstar Holdings

  • American Tobacco Company, broken up in 1911

  • Chicago Gas Company, bought by Peoples Gas Light & Coke Co. in 1897 (now Peoples Energy Corporation)

  • Distilling & Cattle Feeding Company, now Millennium Chemicals

  • Laclede Gas Light Company, still in operation as The Laclede Group

  • National Lead Company, now NL Industries

  • North American Company, broken up in the 1950s

  • Tennessee Coal, Iron and Railroad Company, bought by U.S. Steel in 1907

  • U.S. Leather Company, dissolved 1952

  • United States Rubber Company, changed its name to Uniroyal in 1967, bought by Michelin in 1990

 

When it was first published, the index stood at 40.94. It was computed as a direct average, by first adding up stock prices of its components and dividing by the number of stocks. In 1916, the number of stocks in the DJIA was increased to twenty, and finally to thirty in 1928. On November 14, 1972 the average closed above 1,000 (1,003.16) for the first time.

 

The 1980s and especially the 1990s saw a very rapid increase in the average. On November 21, 1995 it closed above 5,000 (5,023.55) for the first time and on March 29, 1999 the average closed at 10,006.78 which was the first time the index closed above the 10,000 mark. Just over a month later on May 3, 1999, it closed at 11,014.70, its first close above 11,000. The average closed at an all-time peak of 11,722.98 on January 14, 2000. By mid-2002 however, it had returned to its 1998 level of 8000. On October 9, 2002, the DJIA bottomed out at 7286.27 (intra-day low 7197.49), its lowest close since October 1997. By the end of 2003, however, the Dow returned to the 10,000 level. On January 9, 2006 the average broke the 11,000 barrier for the first time since June 2001, closing at 11,011.90. 

 

The largest one-day percentage drop in the history of Dow Jones was on December 12, 1914, 24.39%. The largest one-day percentage drop in the last 50 years occurred on "Black Monday" in 1987 when the average fell 22.6%. The largest one-day point drop occurred on September 17, 2001, the first day of trading after the September 11, 2001 attacks, when the Dow fell 684.81 points or 7.1%. By the end of the week of September 17th, the Dow had fallen 1369.70 points, or 14.3%.

 

 

Criticism

 

Some people criticize the DJIA because it is a price-weighted average, which gives relatively higher-priced stocks more influence over the average than their lower-priced counterparts. This can produce misleading results, as a $1 increase in a lower-priced stock can be negated by a $1 decrease in a much higher-priced stock, even though the first stock experienced a larger percentage change. Additionally, the inclusion of only 30 stocks in the average has brought on additional criticism of the average, as the DJIA is widely used as an indicator of overall market performance.

 

Many critics of the DJIA recommend the S&P 500 index or the NASDAQ as better indicators of the wider economy.

 

Another issue with the Dow is that not all 30 components open at the same time in the morning. Only a few components open at the start and the posted opening price of the Dow is determined by the price of those few components that open first and the previous day's closing price of the remaining components that haven't opened yet; therefore, the posted opening price on the Dow will always be close to the previous day's closing price (which can be observed by looking at Dow price history) and will never accurately reflect the true opening prices of all its components. Furthermore, in terms of candlestick charting theory, the Dow's posted opening price cannot be used in determining the condition of the market.

 

 

 

 

Components

 

The individual components of the DJIA are occasionally changed as market conditions warrant. They are selected by the editors of The Wall Street Journal. When companies are replaced, the individual weightings are adjusted so that the value of the average is not directly affected by the change.

 

On November 1, 1999, Chevron, Goodyear Tire and Rubber Company, Sears Roebuck, and Union Carbide were removed from the DJIA and replaced by Intel, Microsoft, Home Depot, and SBC Communications. Intel and Microsoft became the first two companies traded on the NASDAQ exchange to be listed in the DJIA. On April 8, 2004, another change occurred as International Paper, AT&T, and Eastman Kodak were replaced with Pfizer, Verizon, and AIG. December 1, 2005 AT&T's original T symbol returned to the DJIA as a result of the SBC Communications and AT&T merger.

 

The Dow Jones Industrial Average consists of the following 30 companies:

 

  • 3M Co. (NYSE: MMM) (conglomerates, "manufacturing")

  • ALCOA Inc. (NYSE: AA) (aluminum)

  • Altria Group, Inc. (NYSE: MO) (tobacco, foods)

  • American International Group, Inc. (NYSE: AIG) (property & casualty insurance)

  • American Express Co. (NYSE: AXP) (credit services)

  • AT&T Inc. (NYSE: T) (telecoms)

  • Boeing Co., The (NYSE: BA) (aerospace/defense)

  • Caterpillar, Inc. (NYSE: CAT) (farm & construction equipment)

  • Citigroup, Inc. (NYSE: C) (money center banks)

  • Coca-Cola Co. (NYSE: KO) (beverages)

  • E.I. du Pont de Nemours & Co. (NYSE: DD) (chemicals)

  • Exxon Mobil Corp. (NYSE: XOM) (major integrated oil & gas)

  • General Electric Co. (NYSE: GE) (conglomerates, media)

  • General Motors Corporation (NYSE: GM) (auto manufacturers)

  • Hewlett-Packard Co. (NYSE: HPQ) (diversified computer systems)

  • Home Depot, Inc. (NYSE: HD) (home improvement stores)

  • Honeywell International, Inc. (NYSE: HON) (conglomerates)

  • Intel Corp. (NYSE: INTC) (semiconductors)

  • International Business Machines Corp. (NYSE: IBM) (diversified computer systems)

  • JPMorgan Chase and Co. (NYSE: JPM) (money center banks)

  • Johnson & Johnson Inc. (NYSE: JNJ) (consumer and health care products conglomerate)

  • McDonald's Corp. (NYSE: MCD) (restaurant franchise)

  • Merck & Co., Inc. (NYSE: MRK) (drug manufacturers)

  • Microsoft Corp. (NYSE: MSFT) (software)

  • Pfizer, Inc. (NYSE: PFE) (drug manufacturers)

  • Procter & Gamble Co. (NYSE: PG) (consumer goods)

  • United Technologies Corp. (NYSE: UTX) (conglomerates)

  • Verizon Communications (NYSE: VZ) (telecoms)

  • Wal-Mart Stores, Inc. (NYSE: WMT) (discount, variety stores)

  • Walt Disney Co., The (NYSE: DIS) (entertainment)

 

Weightings

 

The exact weightings for each component are published daily by Dow Jones.

 

 

Investing

 

Apart from investing in the individual stocks in the Dow Jones, there also is the option to invest in an exchange-traded fund (ETF) which represents ownership in a portfolio of the equity securities that comprise the DJIA. This ETF is called the Diamonds, and the ticker symbol is AMEX:DIA. The units of this ETF, therefore, represent an opportunity for the investor to achieve the same performance of the DJIA and trade like any other stock on the Amex Exchange, so they can be bought on margin, sold short or held for the long term.

 

 

External links

 

Performance

 

 

 

New York Stock Exchange (June 2003)

 

 

 

 

MONEY FINDER

 

 

 

ABBEY NATIONAL

ALLIANCE & LEICESTER

ALLIED IRISH

ALTERNATIVE INVESTMENTS

ANGELS

ANZ BANK AUSTRALIA

BANK OF AMERICA

BANK OF TOKYO JAPAN

BANK ONE USA

BANKS

BARCLAYS - UK

BAYERISCHE LANDESBANK - Germany

BNP PARIBAS GROUP - France

BILLIONAIRES

BRISTOL & WEST

BRITISH NATIONAL BUSINESS ANGELS

BRITISH VENTURE CAPITAL FIRMS

BUILDING SOCIETIES A - Z

BUSINESS PLAN

CAHOOT

CANADIAN IMPERIAL BANK - Canada

CHASE MANHATTAN - US

CITIBANK - US

COMEICA BANK - US

CREDIT CARDS

CREDIT LYONNIAS - France

DEUTSCHE BANK - Germany

DOW JONES

DRAGONS DEN

DRESDNER BANK - Germany

ECONOMICS

ELECTRONIC MONEY TRANSFERS

ENTREPRENEUR

EQUITY HOUSES

FINANCIER

FIRST DIRECT

FLEET - US 

FORBES 100 RICHEST

FORBES 500

FOREX INVESTMENTS

FORTUNE 500

FOUNDATIONS - GATES

FTSE

FUJI BANK - JAPAN

HALIFAX

HOLDING COMPANY

HONG KONG STOCK EXCHANGE

HSBC

HSBC BANK USA - UK

HSBC - HK

IMPERIAL BANK - US

INSURANCE

 

 

INVESTORS INDEX

IMF

J PIERPOINT MORGAN

JOHANNESBURG STOCK EXCHANGE

LA SALLE BANK - US

LOANS

LONDON STOCK EXCHANGE - MARKET

LLOYDS

MADRID STOCK EXCHANGE

MARKET CAPITALISATION

MAYBANK - Malaysia

MONEY

MONEY LAUNDERING

MORTGAGES

NASDAQ

NATIONAL AUSTRALIA BANK GROUP

NATIONAL LOTTERY

NATIONAL WESTMINSTER BANK

NATIONAL BUSINESS ANGEL NETWORK

NATIONAL CITY BANK - US

NEW YORK STOCK EXCHANGE

OFFSHORE BANKING

PENSIONS

PLCs

RBS ROYAL BANK OF SCOTLAND

SANWA BANK - Japan

SAVINGS

SHAREHOLDERS

SHARES, STOCKS, DIVIDENDS

SHELL COMPANIES

SIAM COMMERCIAL BANK - Thailand

SOCIETE GENERALE - France

SOUTHERN BANK BERHAD - Malyasia

STANDARD CHARTERED BANK - UK

STATE STREET BANK - US

STOCKS AND SHARES

SUMITOMO MITSUI BANK - Japan

SWISS BANK ACCOUNTS

TAX HAVENS

THAI FARMERS BANK - Thailand

THE AMERICAN DOLLAR

THE POUND STERLING

TORONTO DOMINION BANK - Canada

TRUSTS

UBS AG - Switzerland

UNION BANK OF CALIFORNIA

VENTURE CAPITAL

WALL STREET

WELLS FARGO - US

WEST DEUTSCHE LANDESBANK - Germany

WORLD BANK

WOOLWICH

 

 

 

 

 

 

 

Laser weapons on boats are now a reality against pirates

SolarNavigator is to be equipped with the SNAV intelligent autonomous navigation system. This system is thought to be the only system under development that is COLREGs compliant.

 

 

  

This website is copyright © 1991- 2013 Electrick Publications. All rights reserved. The bird logo and names Solar Navigator and Blueplanet Ecostar are trademarks ™.  The Blueplanet vehicle configuration is registered ®.  All other trademarks hereby acknowledged and please note that this project should not be confused with the Australian: 'World Solar Challenge'™which is a superb road vehicle endurance race from Darwin to Adelaide.  Max Energy Limited is an educational charity working hard to promote world peace.

 

 AUTOMOTIVE  |  BLUEPLANET BE3  |  ELECTRIC CARS  |  ELECTRIC CYCLES  |  SOLAR CARS  SOLARNAVIGATOR