What is Dow?

The Dow Jones Industrial Average (DJIA), or simply the Dow, is one of the oldest and most important stock indexes in the world. The Dow is a price-weighted index, meaning it measures the value of the stock market by the average of the prices of its 30 component companies. It is one of the three most widely followed indices in the United States, along with the S&P 500 and the NASDAQ Composite.

What are the Components of the Dow?

The Dow is composed of 30 of the most influential and well-known U.S. companies from many different industries, ranging from banking, aerospace and defense, technology, health care and more. Each Dow component stock is given a weight, which is equal to the stock’s percentage price change of the index. Generally, price-weighted indices have higher weightings for higher-priced stocks, resulting in the Dow being influenced more by the price moves of bigger companies. By design, the Dow is highly sensitive to the stock price moves of its components, with just a few large moves in select Dow stocks affecting the entire index.

What is the History of the Dow?

The Dow was first published in May of 1896 by Charles Dow and Edward Jones. It was created as an economic barometer of the performance of leading industrial companies in the U.S., and it has been used by investors as an important indicator of the present market conditions and a reliable predictor of future market performance. The Dow has evolved over the years, with many changes in its composition, index weightings, and the addition of new metrics. Today, the Dow is one of the most widely followed and respected stock indexes in the world. It is the oldest and most trusted US stock index and serves as a benchmark for the US equity market.