A:

The Dow Jones Industrial Average (DJIA) was first published on May 26, 1896, by two financial reporters, Charles Dow and Edward Jones. At that time, the index followed the 12 largest companies in each sector of the U.S. stock market. The first published value of the Dow Jones, 40.94, was calculated by taking the average market price for the 12 companies.

The index was a way for Dow and Jones to report the overall health of the stock market to investors. They had been working together at their company, Dow, Jones & Co., since 1882, publishing a daily financial newsletter called the Customer's Afternoon Letter, which gave readers a recap of the day's stock prices and news. Later, the company published The Wall Street Journal. At the time, investors had little access to truthful and unbiased information about company financials. Companies often withheld or skewed certain information, leaving investors skeptical and timid. The Dow Jones Industrial Average was, therefore, necessary to build rapport for the stock market with investors.

The 12 original companies that represented every segment of the market at the time, except railroads and transportation, were as follows:

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

General Electric is the only company in existence in its original form, while the others were acquired, closed, or merged with other companies. Some of them are part of companies known in modern society. As the economy changed, so did the index, expanding in 1929 to include 30 companies.

(For related reading, see: "Why the Dow Matters.")

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