The Dow Jones Industrial Average (DJIA), which is the best known market index, dates back to 1896. It is maintained by Dow Jones and Company, which publishes The Wall Street Journal and Barron's. Since 1928, the index has consisted of 30 stocks. Every so often the list is revised due to mergers, companies that are no longer considered "blue chips", or to reflect changes in the general nature of the economy (from manufacturing and service and technology). Because 1996 is the centennial year of the Dow, The Wall Street Journal and Barron's have been running special articles and published supplements about the index in May. If you are interested in the history of the Dow and which stocks have been in the index, you should read one or both of these supplements. Your local library should have them.
The index is computed by adding up the prices of the 30 stocks and then dividing a number, which is called the divisor. The divisor is designed to produce a consistent stream of values without jumps adjusts for splits, changes in the 30 stocks, or restructures and spin-offs (such as General Motors spinning off Delphi Automotive in 1999). Changes to the divisor are published in The Wall Street Journal. The current (11/99) value of the divisor is about 1/5, so each point change in an individual Dow stocks results in about a five point change in the DJIA. Because the prices of all 30 stocks are added up, the higher priced stocks in the Dow have more influence than the lower priced ones. For example, a 5% change in a high priced stock such as American Express, which is currently selling over 150, would be more than 7.5 points, which would cause the Dow to move by over 37 points if all the other stocks remained unchanged. A 5% in a stock selling around 40 such as McDonolads is about 2 points, which would move the Dow by about 10 points.
Despite this flaw and a few others, the Dow has established itself, and when someone asks how the "market" is doing, the answer is usually the change in the Dow for the day. The 30 stocks currently (as of 3/2008) in the DJIA and their ticker symbols are:
Alcoa (AA)
American Express (AXP)
American International Group (AIG)
AT&T [was SBC Communications until 11/05] (T)
Bank of America (BAC)
Boeing (BA)
Caterpillar (CAT)
Chevron (CVX)
Citigroup (C)
Coca-Cola (KO)
Disney (DIS)
DuPont (DD)
Exxon (XON)
General Electric (GE)
General Motors (GM)
Hewlett-Packard Compaq (HPQ)
Home Depot (HD)
IBM (IBM)
Intel (INTC)
Johnson and Johnson (JNJ)
McDonald's (MCD)
Merck (MRK)
Microsoft (MSFT)
MMM (MMM)
J.P. Morgan (JPM)
Pfizer (PFE)
Proctor and Gamble (PG)
United Technologies (UTX)
Verizon Communications (VZ)
WalMart (WMT)
The following four stocks were removed from the Dow in March 1997:
Bethlehem Steel (BS)
Texaco (TX)
Westinghouse (WX)
Woolworth (Z)
In November 1999, four more stocks were removed from the Dow:
Chevron (CHV)
Goodyear (GT)
Sears (S)
Union Carbide (UK)
In April 2004, these three stocks were removed from the Dow:
AT&T (T). In 2005 SBC took over the remnants of AT&T and then
changed its name and stock ticker symbol to those of the legendary "Ma Bell".
Eastman Kodak (EK)
International Paper (IP)
In February 2008, two stocks were removed from the Dow:
Altria, was Phillip Morris (MO)
Honeywell (HON)