If it had been created by Charles Peterson, or Victoria Mamigonian, we might see references each night on the news to "The Peterson" or "The Mamigonian." But no, it was Charles Dow.
Created in 1896 by Charles Dow, who also established The Wall Street Journal, the Dow Jones Industrial Average (referred to by those in the know as "the Dow") is an index of 30 major American companies chosen to represent U.S. industry. It's probably the world's best-known index.
The 30 companies that make up the Dow don't change much from year to year. In fact, typically, many years go by with no change at all. Still, every now and then a few companies are ejected from the Dow to make room for some upstarts. Of the original component companies, General Electric is probably the only name familiar to most investors today. Laclede Gas, Distilling & Cattle Feeding, Tennessee Coal & Iron, and American Cotton Oil are no longer the blue chips they once were.
A big shake-up in Dow component companies occurred in October 1999, when Sears (NYSE:S), Union Carbide, Goodyear Tire & Rubber Co. (NYSE:GT), and Chevron [now ChevronTexaco (NYSE:CVX)] were removed so that Home Depot (NYSE:HD), Microsoft (NASDAQ:MSFT), Intel (NASDAQ:INTC), and SBC Communications (NYSE:SBC) could be added. This was a milestone, since Microsoft and Intel were the first additions coming from the Nasdaq Stock Market and not the more venerable New York Stock Exchange.
The Dow is a familiar name to most Americans because it has been used as a market proxy by the media for decades. Until recently, a newscaster might have reported on the state of the entire stock market simply by saying, "The Dow was up 40 points today." It's more common these days for the media to report on other market measures as well, such as the S&P 500 (an index of 500 of the biggest companies around) and the Nasdaq (with about 5,000 companies).
Learn more about the Dow at djindexes.com, which offers a brief history of the Dow and a FAQ about it. Here's a list of the current 30 components.
