Dow Jones averages

Dow Jones averages are the most widely quoted INDICATORS of the U.S. STOCK MARKET. There are three Dow Jones averages: industrials, transportation, and utilities. The Dow Jones Industrial Average (DJIA) is the oldest and bestknown indicator. In 1882 Charles Dow, Edward Jones, and Charles Bergstresser began producing a market newsletter delivered by messenger to subscribers in the WALL STREET area of New York. At the time the stock market was not highly regarded, being perceived as the province of speculators and market manipulators. Dow, Jones, and Bergstresser provided information to investors, and in 1884 they created their first index with 11 stocks, mostly railroad companies. Their business grew, and the newsletter quickly became a newspaper that would be called The Wall Street Journal. In 1896 Dow Jones created their industrial average. At the time it included 12 stocks. The DJIA was calculated by adding up the closing price of these companies and dividing by 12. On May 26, 1896, the DJIA was 40.94. The average was increased to include 20 stocks in 1916 and 30 stocks in 1928. While the number of stocks in the DJIA has remained constant since then, the companies included in the index change infrequently. The editors of The Wall Street Journal select which stocks are included in the industrial average. The definition of “industrial” has changed as the U.S. economy has shifted away from primarily manufacturing to, increasingly, a service economy. Any stock (other than utility and transportation companies, which are included in the other Dow Jones averages) can be considered for inclusion in the index. In 1999 four companies—Union Carbide, Goodyear Tire & Rubber, Sears Roebuck, and Chevron—were removed from the DJIA, and Home Depot, Intel, Microsoft, and SBC Communications were added. A few companies have been added and deleted more than once, including General Electric, DuPont, U.S. Rubber, and IBM. Changes to the index usually occur when a company is acquired by another company eliminating that stock from the market. While almost all other stock-market indexes are weighted by the market capitalization (price times the number of shares outstanding) of the stocks included in the index, the DJIA is an unweighted index. The DJIA is a relatively narrow indicator of the U.S. stock market, but because it is the oldest index, it is the most widely quoted. While it is well known, changes in the DJIA are neither a reliable indicator of future stock market changes nor a reliable predictor of changes in the economy. Generally changes in the stock market precede changes in the economy, but not always and not exactly by the same amount of lead time. The Dow Jones Transportation Average (DJTA) and utilities average (DJUA) are, as their names indicate, industrysector averages. Stock-market analysts use changes in the transportation and utilities averages as indicators of change in the larger market. Dow Jones is a leading U.S. financial information service company. In addition to publishing The Wall Street Journal, they publish Barrons, Far Eastern Economic Review, Dow Jones newswires, and WSJ.com.