The Dow, the oldest continuing U.S. market index, is a way of measuring the combined stock values of 30 big U.S. companies. It's one of several stock market indices created by nineteenth-century Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow. Dow compiled the index to gauge the performance of the industrial sector of the American stock market. It is the second-oldest U.S. market index, after the Dow Jones Transportation Average, which Dow also created.

COMPUTATION 

The computation for the index is derived from a mathematical formula to adjust for things like stock splits — when a company changes the number of shares its stockholders have and adjusts the price — or new companies being added or removed. The idea is to keep the index consistent over time, and to make sure today's value can be compared in a meaningful way to what it was a year ago or 10 years ago.

This can be done various ways mathematically, but at Dow Jones it is handled by changing the "divisor" — a number that is divided into the total of the stock prices. That divisor currently stands at 0.1255527090.

COMPOSITION 

The 30 dow components as of now include: 3M, Alcoa, American Express, AT&T, Bank of America, Boeing, Caterpillar, Chevron, Citigroup, Coca-Cola, DuPont, ExxonMobil, General Electric, General Motors, Hewlett-Packard, Home Depot, Intel, IBM, Johnson & Johnson, JPMorgan Chase, Kraft Foods, McDonald's, Merck, Microsoft, Pfizer, Procter & Gamble, United Technologies, Verizon Communications, Wal-Mart and Walt Disney.

When it was first published, the index stood at 40.94

INDEX HISTORY 

What were removed and replaced: 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. On December 1, 2005, AT&T returned to the DJIA as a result of the SBC Communications and AT&T merger. Altria Group and Honeywell were replaced by Chevron and Bank of America on February 19, 2008. On September 22, 2008, Kraft Foods replaced American International Group in the index.

IMPORTANCE

It has been a widely followed indicator of the stock market and overall health of the economy since October 1, 1928. Some on Wall Street downplay the importance of the average because it isn't as broad a measure as counterparts like the Standard & Poor's 500 index, which reflects the performance of 500 companies' stocks.

Analysts generally believe it is a useful tool when combined with other market indicators, including the S&P 500 and the Nasdaq index.

SOME INTERESTING STATISTICS

The Dow Performance at the Onset of Major National Security Events 

sources and other references

http://www.mercurynews.com/nationworld/ci_10713766
http://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average
http://en.wikipedia.org/wiki/Closing_milestones_of_the_Dow_Jones_Industrial_Average
http://en.wikipedia.org/wiki/List_of_largest_daily_changes_in_the_Dow_Jones_Industrial_Average

Related Posts You May Wanna Read Too

• DMN Sept 2
• The Return of DMN Sept 1
• DMN AUG 26 Philippines Hostage Crisis on Pam NTS Trading Terminals
• DMN AUG 25 Philippines moves on after hostage crisis
• DMN Aug 23
• DMN AUG 19
• DMN AUG 17
• DMN AUG 16
• DMN AUG 13
• DMN AUG 10