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Dow Jones Industrial Average

The Dow Jones Industrial Average (DJIA), Dow Jones, or simply the Dow (/ˈd/), is a stock market index of 30 prominent companies listed on stock exchanges in the United States.

"Dow Jones index" redirects here. For other indices, see Dow Jones.

Foundation

February 16, 1885 (1885-02-16) (as DJA)[1]
May 26, 1896 (1896-05-26) (as DJIA)[2]

  • ^DJI
  • $INDU
  • .DJI
  • DJIA

30

US$12.0 trillion
(as of December 29, 2023)[3]

The DJIA is one of the oldest and most commonly followed equity indexes. Many professionals consider it to be an inadequate representation of the overall U.S. stock market compared to a broader market index such as the S&P 500. The DJIA includes only 30 large companies. It is price-weighted, unlike stock indices, which use market capitalization. Furthermore, the DJIA does not use a weighted arithmetic mean.[4][5][6][7]


The value of the index can also be calculated as the sum of the stock prices of the companies included in the index, divided by a factor, which is approximately 0.152 as of April 2024. The factor is changed whenever a constituent company undergoes a stock split so that the value of the index is unaffected by the stock split.


First calculated on May 26, 1896,[2] the index is the second-oldest among U.S. market indices, after the Dow Jones Transportation Average. It was created by Charles Dow, co-founder of both The Wall Street Journal and the Dow Jones & Company, and named after him and his business associate, statistician Edward Jones.


The index is maintained by S&P Dow Jones Indices, an entity majority-owned by S&P Global. Its components are selected by a committee. The ten components with the largest dividend yields are commonly referred to as the Dogs of the Dow. As with all stock prices, the prices of the constituent stocks and consequently the value of the index itself are affected by the performance of the respective companies as well as macroeconomic factors.

On May 6, 1991, , J.P. Morgan & Co., and The Walt Disney Company replaced American Can, Navistar, and U.S. Steel.[9]

Caterpillar Inc.

On November 1, 1999, , Intel, SBC Communications, and Home Depot replaced Goodyear Tire, Sears Roebuck, Union Carbide, and Chevron Corporation.[11] Intel and Microsoft became the first and second companies traded on the Nasdaq to be part of the Dow.[11]

Microsoft

On April 8, 2004, , Pfizer, and Verizon Communications replaced AT&T Corporation, Kodak, and International Paper.[12]

American International Group

On February 19, 2008, and Bank of America replaced Altria Group and Honeywell. Chevron was previously a Dow component from July 18, 1930, to November 1, 1999. During Chevron's absence, its split-adjusted price per share went from $44 to $85, while the price of petroleum rose from $24 to $100 per barrel.[13]

Chevron Corporation

On September 22, 2008, replaced American International Group (AIG) in the index.[14][15]

Kraft Foods Inc.

On June 8, 2009, and Cisco Systems replaced Motors Liquidation Company (formerly General Motors) and Citigroup. Cisco became the third company traded on the NASDAQ to be part of the Dow.[16]

The Travelers Companies

On September 24, 2012, replaced Kraft Foods Inc. following Kraft's split into Mondelez International and Kraft Foods.[17][18]

UnitedHealth Group

On September 20, 2013, , Nike, Inc., and Visa Inc. replaced Alcoa, Bank of America, and Hewlett-Packard. Visa replaced Hewlett-Packard because of the split into HP Inc. and Hewlett Packard Enterprise.[19][20][21]

Goldman Sachs

On March 19, 2015, replaced AT&T, which had been a component of the DJIA since November 1916.[22][23] Apple became the fourth company traded on the NASDAQ to be part of the Dow.

Apple Inc.

On September 1, 2017, replaced DuPont. DowDuPont was formed by the merger of Dow Chemical Company with DuPont.[24]

DowDuPont

On June 26, 2018, replaced General Electric, which had been a component of the DJIA since November 1907, after being part of the inaugural index in May 1896 and much of the 1896 to 1907 period.[25][26][27]

Walgreens Boots Alliance

On April 2, 2019, replaced DowDuPont. Dow, Inc. is a spin-off of DowDuPont, itself a merger of Dow Chemical Company and DuPont.[28][29][30]

Dow Inc.

On April 6, 2020, replaced United Technologies. Raytheon is the name of the combination of United Technologies and the Raytheon Company, which merged as of April 3, 2020. The newly combined conglomerate does not include previous subsidiaries Carrier Global or Otis Worldwide.[31]

Raytheon Technologies

On August 31, 2020, , Honeywell, and Salesforce.com replaced ExxonMobil, Pfizer, and Raytheon Technologies.[32]

Amgen

On February 26, 2024, replaced Walgreens Boots Alliance.[33]

Amazon

As of February 26, 2024, the components of the DJIA have changed 58 times since its beginning on May 26, 1896. General Electric had the longest continuous presence on the index, beginning in the original index in 1896 and ending in 2018. Changes to the index since 1991 are as follows:

American Cotton Oil Company, a predecessor company to , now part of Unilever.[41]

Hellmann's and Best Foods

, became Domino Sugar in 1900, now Domino Foods, Inc.[41]

American Sugar Refining Company

, broken up in a 1911 antitrust action.

American Tobacco Company

Chicago Gas Company, bought by Light in 1897, was an operating subsidiary of the now-defunct Integrys Energy Group until 2014.[41]

Peoples Gas

Distilling & Cattle Feeding Company, now , formerly a division of LyondellBasell.[42][41]

Millennium Chemicals

, still in operation, removed from the Dow Jones Industrial Average in 2018.[41]

General Electric

, still in operation as Spire Inc, removed from the Dow Jones Industrial Average in 1899.[41]

Laclede Gas Company

National Lead Company, now , removed from the Dow Jones Industrial Average in 1916.[41]

NL Industries

, an electric utility holding company, broken up by the U.S. Securities and Exchange Commission (SEC) in 1946.[41]

North American Company

in Birmingham, Alabama, bought by U.S. Steel in 1907; U.S. Steel was removed from the Dow Jones Industrial Average in 1991.[41]

Tennessee Coal, Iron and Railroad Company

, dissolved in 1952.[41]

United States Leather Company

, changed its name to Uniroyal in 1961, merged with private Goodrich Corporation in 1986, tire business bought by Michelin in 1990.[41] (The remainder of Goodrich remained independent several more years but was acquired by United Technologies in 2012 and became a part of UTC Aerospace Systems, now Collins Aerospace, a Raytheon Technologies subsidiary.)

United States Rubber Company

Assessment[edit]

Issues with market representation[edit]

With the inclusion of only 30 stocks, critics such as Ric Edelman argue that the DJIA is an inaccurate representation of overall market performance compared to more comprehensive indexes such as the S&P 500 Index or the Russell 3000 Index. Additionally, the DJIA is criticized for being a price-weighted index, which gives higher-priced stocks more influence over the average than their lower-priced counterparts, but takes no account of the relative industry size or market capitalization of the components. For example, a $1 increase in a lower-priced stock can be negated by a $1 decrease in a much higher-priced stock, even though the lower-priced stock experienced a larger percentage change. In addition, a $1 move in the smallest component of the DJIA has the same effect as a $1 move in the largest component of the average. For example, during September–October 2008, former component AIG's reverse split-adjusted stock price collapsed from $22.76 on September 8 to $1.35 on October 27; contributing to a roughly 3,000-point drop in the index.[81]


As of June 2021, Goldman Sachs and UnitedHealth Group are among the highest-priced stocks in the average and therefore have the greatest influence on it. Alternately, Cisco Systems and Coca-Cola are among the lowest-priced stocks in the average and have the least sway in the price movement.[82] Critics of the DJIA and most securities professionals recommend the market-capitalization weighted S&P 500 Index or the Wilshire 5000, the latter of which includes most publicly listed U.S. stocks, as better indicators of the U.S. stock market.

Correlation among components[edit]

A study between the correlation of components of the Dow Jones Industrial Average compared with the movement of the index finds that the correlation is higher when the stocks are declining. The correlation is lowest in a time when the average is flat or rises a modest amount.[83]

Closing milestones of the Dow Jones Industrial Average

List of largest daily changes in the Dow Jones Industrial Average

William Peter Hamilton

S&P 500

Stillman, Richard (1986). . Homewood, Ill.: Dow Jones-Irwin. ISBN 9780870945861. OCLC 424238820.

Dow Jones Industrial Average: History and Role in an Investment Strategy

Official website

Dow Jones Industrial Average at NASDAQ