Table of Contents
Table of Contents

Why the Dow Matters

The Dow Jones Industrial Average (DJIA) is one of the most quoted financial barometers in the world and has become synonymous with the financial markets in general. When people say the market has gone up or down by a certain number of points, there’s a good chance they're referring to changes in the Dow. 

Key Takeaways

  • The Dow Jones Industrial Average (DJIA) was created to serve as a stock market and economic indicator. 
  • Charles Dow’s first version of the DJIA appeared in the Wall Street Journal in 1896, containing 12 stocks. 
  • The DJIA expanded to 30 stocks in 1929, which is the number of stocks it still maintains today. 
  • The DJIA has proved to be a solid representation of the broader market, closely tracking the much more inclusive Wilshire 5000 index.  

Brief History

Charles Dow, the creator of the DJIA, devised his first stock index in 1884. It consisted of two capitalized industrial and 12 capitalized railroad companies. Dow's intent was to track U.S. economic strength by closely observing the companies considered to be the backbone of the U.S. economy. 

In 1886, Dow altered the index to contain 10 railroads and two industrials. In the mid-1890s, Dow recognized the growing importance of the industrial sector in the U.S. economy and again altered the index, this time to consist solely of industrial stocks. The first version of the DJIA, which contained 12 stocks, appeared in The Wall Street Journal on May 26, 1896. The following are the original 12 Dow stocks:

  • American Cotton Oil
  • American Sugar
  • American Tobacco
  • Chicago Gas
  • Distilling & Cattle Feeding
  • General Electric
  • Laclede Gas
  • National Lead
  • North American
  • Tennessee Coal and Iron
  • U.S. Leather pfd.
  • U.S. Rubber

While an odd-looking combination by today's economic standards, these 12 stocks were carefully chosen to represent the major areas of the U.S. economy at the time. The 30-stock Dow Jones Industrial Average debuted in 1928. The following are the first 30 Dow stocks following the 1928 expansion:

  • Allied Chemical
  • American Can
  • American Smelting
  • American Sugar
  • American Tobacco
  • Atlantic Refining
  • Bethlehem Steel
  • Chrysler
  • General Electric
  • General Motors Corporation
  • General Railway Signal
  • Goodrich
  • International Harvester
  • International Nickel
  • Mack Truck
  • Nash Motors
  • North American
  • Paramount Publix
  • Postum Incorporated
  • Radio Corporation
  • Sears Roebuck & Company
  • Standard Oil (N.J.)
  • Texas Company
  • Texas Gulf Sulphur
  • Union Carbide
  • U.S. Steel
  • Victor Talking Machine
  • Westinghouse Electric
  • Woolworth
  • Wright Aeronautical

Since then, it has changed over the years as some stocks were removed and others added to maintain an accurate reflection of the U.S. economy. Of the original 12 Dow stocks, General Electric (GE) is the only one that stood the test of time and was still in the index until it was removed in 2018.

There are also two other Dow averages, the Dow Jones Utility Average (DJUA) and the Dow Jones Transportation Average (DJTA), which consists of stocks in the railroad, trucking, shipping, and airline industries.

Today's Dow

Considering the breadth of today's economy, one might mistakenly believe that an index consisting of a mere 30 stocks could hardly be of any value. That is simply untrue. In addition to representing 30 of the most highly capitalized and influential companies in the U.S. economy, the Dow is also the financial media's most referenced U.S. market index and remains a good indicator of general market trends.

Changes to the Dow Components August 24, 2020

On August 24, 2020, Salesforce, Amgen, and Honeywell were added to the Dow, replacing ExxonMobil, Pfizer, and Raytheon Technologies.

If one compares a pricing chart of the Dow with a chart of the Wilshire 5000, the most inclusive of all U.S. indexes, it is evident that the two have followed astonishingly similar paths. The Dow has historically begun to decline for extended periods before the more speculative Nasdaq index, a pattern that occurred in the stock market downturns that began in April of 1998, January of 2000, December of 2001, January of 2004, December of 2004, and October of 2007. Some believe that when the stocks of DJIA companies begin to show weakness, the U.S. economy may be headed for a slowdown.

The table below alphabetically lists the companies included in the DJIA as of August 2020:

Dow Jones Industrial Average Components
Company Symbol Year Added
3M MMM 1976
American Express AXP 1982
Amgen AMGN 2020
Apple Inc. AAPL 2015
Boeing BA 1987
Caterpillar CAT 1991
Chevron CVX 2008
Cisco Systems CSCO 2009
The Coca-Cola Company KO 1987
Dow Inc. DOW 2019
Goldman Sachs GS 2013
The Home Depot HD 1999
Honeywell HON 2020
IBM IBM 1979
Intel INTC 1999
Johnson & Johnson JNJ 1997
JPMorgan Chase JPM 1991
McDonald's MCD 1985
Merck & Co. MRK 1979
Microsoft MSFT 1999
Proctor & Gamble PG 1932
Salesforce CRM 2020
The Travelers Companies TRV 2009
UnitedHealth Group UNH 2012
Verizon VZ 2004
Visa V 2013
Walmart WMT 1997
Walmart WBA 2018
The Walt Disney Company DIS 1991
30 DJIA companies as of August 2020

The other two Dow Jones indexes covering transportation and utilities can also signal market and economic trends. Those who subscribe to Dow Theory analysis believe the three Dow Jones indexes can be used to confirm each other. The theory holds that if any of the three Dow Jones indexes, particularly the Dow 30 and the Transports, begin to diverge in direction during a market uptrend, caution may be warranted.

The basic tenet of Dow Theory is that the three Dow Jones indexes represent the major areas of the U.S. economy: industrials, transportation, and utilities. When there is a weakness in one, there may be weakness coming in the others and in the U.S economy in general. 

Ways to Invest in the DJIA

There are a number of ways to invest in the Dow Jones Industrial Average. The most obvious is to buy shares of the companies it includes. But several exchange-traded funds (ETFs) also track the price movements of the Dow, including the SPDR Dow Jones Industrial Average ETF (DIA), Elements Dow Jones High Yield Select 10 Total Return Index (DOD), and ProShares Ultra Dow30 (DDM). 

The Bottom Line

The DJIA continues to serve its original purpose as a market and economic indicator, as set forth by Charles Dow. As long as it contains the stocks of companies that reflect the major industrial areas of the U.S. economy during any given period, this 30-stock index will likely remain the gold standard of financial indicators.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Library of Congress. "This Month in Business History: Dow Jones Industrial Average First Published."

  2. S&P Dow Jones Indices. "The Dow and the S&P 500: Where It All Began," Page 1.

  3. S&P Dow Jones Indices. "Dow Jones Industrial Average: Historical Components."

  4. Reuters. "General Electric Loses Place in Elite Dow Jones Industrial Average."

  5. S&P Dow Jones Indices. "Dow Jones Transportation Average."

  6. S&P Dow Jones Indices. "Dow Jones Utility Average."

  7. Yahoo Finance. "Dow Jones Industrial Average (^DJI) Nasdaq Comparison Interactive Chart."

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