History of the Dow Jones Industrials Index 1884 - 2002

Since its inception in 1884 the Dow Jones Industrials Index' composition underwent numerous changes. As the focus in the economy shifted over the decades many different stocks comprised the Index over the years reflecting the developments in the economy. Most recently technology stocks such as Microsoft  and Intel were added to this most watched stock market indicator as the past decade was the period of another technology revolution. A history of the Dow is therefore also a history of the US economy and the booms and busts that occurred over the past 117 years. 

Charles Dow and the Creation of the Averages

Chronology and Evolution of the Dow Jones Averages

1884    1894    1896    1898   
1900    1905    1915    1924  

 
Charles Dow and the Creation of the Averages

Neither financier nor broker Charles Dow was a journalist. The stock averages he devised provided a window for outsiders to view the market; Wall Street types were welcome to use it, but they were not his chief concern.
When Dow came to Wall Street, the investment market of choice was bonds. Investors liked securities that were backed by real machinery, factories and other hard assets. They felt reassured by the predictability of income that bonds offered, as well as the specific dates of maturity when their principle would be returned. The stock market by contrast, dealt in "shares of ownership'' which had no specific claim on anything a company owned.

People on Wall Street found it difficult to analyze the daily jumble of up-a-quarter and down-an-eighth or whether stocks generally were rising, falling or staying even. Charles Dow devised his stock average to make sense of this confusion. He began in 1884 with 11 stocks, most of them railroads. Railroads were among the biggest and sturdiest companies in America at that time, which is why they dominated Dow's first average. Few stocks of industrial companies were publicly traded, and those were considered highly speculative.
On May 26, 1896, he introduced the industrial average. In October of that year, Dow's original average shed the last of its non-railroad stocks and became the 20-stock railroad average. To complete this line of history, the utilities average came along in 1929 -- more than a quarter-century after Dow's death at age 51 in 1902 -- and the railroad average was renamed the transportation average in 1970.

Nowadays, of course, there are plenty of indicators to tell investors what the stock market is doing. But most people rely on the The Dow Jones Industrial Average, which is in sync with other major market barometers. That's true despite the difference in computation methods; the Dow is unweighted while almost all other indexes weight their stocks by market capitalization, which is price times shares outstanding. It's also true despite the fewer number of stocks in the Dow.

The Dow's durability, is in the selection of companies that make up the industrial average. Though there is occasional criticism on this assemblage, collectively, the 30 Dow industrial stocks represent every important sector in the stock market (except transportation and utilities), and they respond to every important factor in the economy.

There isn't anything to prevent Nasdaq issues from being added to the industrial or utilities averages. The tradition of using Big Board stocks stemmed from Charles Dow's intent of using only the most "respectable" stocks in his averages. Over time, those choices became the "blue chip" companies of America, and invariably they were listed on the New York Stock Exchange. That's no longer true, as several "blue chip" companies choose to trade on Nasdaq.

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Chronology and Evolution of the Dow Jones Averages

July 3, 1884 - Published first average of American stocks in Customer's Afternoon Letter. List included:

February 16, 1885 - List of 12 railroads and two industrials published:

 
January 2, 1886 - The above list replaced by average of 12 stocks, 10 of which were railroads and two industrials:

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April 9, 1894 - Following substitutions were made:

Delete from average:		Add to average:
Lake Shore Railroad		Chicago, Burlington & Quincy
New York Central		Chicago, Rock Island & Pacific
Pacific Mail Steamship		American Sugar

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May 26, 1896 - Average consisting entirely of industrial stocks published for first time. The list contained:

(The first average computed from this list of stocks was 40.94. It declined gradually during June and July and on August 8, 1896, stood at 28.48 which is the lowest point on record for the industrial average. )

August 26, 1896 - Distilling & Cattle Feeding became American Spirits Manufacturing and U.S. Cordage preferred was substituted for North American.

October 7, 1896 - Daily publication in The Wall Street Journal began with the following news comment:



Daily Movement of Averages

"Following is the daily average price of 20 railroad stocks and 12 industrials for 30 days last passed:

Date	12 Indus. in $	20 Railroads in $
Tuesday, September 8	35.50	48.55
Wednesday, September 9	35.39	48.56
Thursday, September 10	35.58	47.71
Friday, September 11	35.30	48.27
Saturday, September 12	35.02	47.86
Monday, September 14	34.86	47.66
Tuesday, September 15	34.13	47.22
Wednesday, September 16	33.20	46.68
Thursday, September 17	34.33	47.77
Friday, September 18	34.81	47.82
Saturday, September 19	35.03	47.91
Monday, September 21	35.53	48.65
Tuesday, September 22	35.59	48.43
Wednesday, September 23	35.78	48.67
Thursday, September 24	36.23	49.16
Friday, September 25	36.61	49.81
Saturday, September 26	36.75	50.21
Monday, September 28	36.35	49.80
Tuesday, September 29	36.33	50.21
Wednesday, September 30	36.05	50.21
Thursday, October 1	36.01	50.17
Friday, October 2	35.88	50.00
Saturday, October 3	35.82	49.86
Monday, October 5	35.92	50.10
Tuesday, October 6	35.91	48.71

"Twelve industrial stocks used are: Sugar, Tobacco, Leather preferred, Cotton Oil, Cordage preferred, Rubber com., Chicago Gas, Tennessee Coal & Iron, General Electric, Lead, American Spirits and Laclede Gas.
"The 20 active stocks used are: Erie, Kansas & Texas preferred, Chesapeake & Ohio Minneapolis & St. Louis 2d preferred, Susquehanna & Western preferred, New York Central, Atchinson, CCC & St. Louis, Southern Railway preferred, Missouri Pacific, Jersey Central, Pacific Mail, Northwest, Louisville & Nashville, Western Union, Rock Island, Burlington. St. Paul, Texas & Pacific and Lake Shore."

(Persons interested in extending the present Dow Jones averages backward as far as possible can consider this the beginning of the railroad average (now transportation) provided they bear in mind that there are two industrial stocks included in the list. It should also be kept in mind that, originally, market quotations were all in percentages. On October 13, 1915, the Stock Exchange ruled that all stocks should sell on a dollar share basis. For the sake of continuity, the average of Pennsylvania, Reading and Lehigh Valley, all having $50 par values, was computed on a percentage basis which was obtained by doubling their market quotations.)
 
October 19, 1896 - Philadelphia & Reading and No. Pacific preferred substituted for Minneapolis & St. Louis 2nd preferred and Texas Pacific in the rail list.

October 26, 1896 - Manhattan Elevated and Wabash preferred were substituted for Pacific Mail and Western Union in the 20 railroads. (This marked the first time the average was computed entirely of railroad stocks.)
 
November 10, 1896 - Pacific Mail Steamship substituted for U.S. Rubber in the industrials.

December 23, 1896 - Standard Rope & Twine substituted for U.S. Cordage preferred in the industrials.

January 4, 1897 - N.Y. Ontario & Western substituted for Susquehanna & Western preferred in the rail list which included: 

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March 24, 1898 - Peoples Gas substituted for Chicago Gas in the industrials.

May 6, 1898 - Metropolitan Traction & Union Pacific preferred substituted for Ontario & Western and Lake Shore.

September 1898 - U.S. Rubber substituted for General Electric in the industrials.

April 21, 1899 - Continental Tobacco, Federal Steel, General Electric, American Steel & Wire substituted for American Spirits Manufacturing, American
Tobacco, Laclede Gas and Standard Rope & Twine in the industrials.

May 22, 1899 - Brooklyn Rapid Transit, Denver & Rio Grande preferred and Norfolk & Western preferred substituted for Metropolitan Street Railway, Reading and Erie in the railroads.

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April 1, 1900 - Southern Pacific common substituted for Wabash preferred in the railroads.

April 7, 1900 - Union Pacific common substituted for Norfolk & Western preferred in the railroads.

May 27, 1901 - Baltimore & Ohio and Illinois Central substituted for Burlington and South Pacific common in the railroads.

June 24, 1901 - Southern Railway common substituted for Southern Railway preferred in the railroads.

June 29, 1901 - Pennsylvania substituted for Northern Pacific preferred in the railroads.

April 1, 1901 - Amalgamated Copper, American Smelting & Refining, International Paper preferred, U.S. Steel common and U.S. Steel preferred were substituted for American Cotton Oil, Federal Steel, General Electric, Pacific Mail and American Steel & Wire in the industrials.

July 1, 1901 - American Car Foundry and Colorado Fuel & Iron substituted for Continental Tobacco and International Paper preferred in the industrials.

September 20, 1902 - Reading, Canadian Pacific, Delaware & Hudson and Minneapolis & St. Louis were substituted for Missouri, Kansas & Texas preferred, Rock Island, Chesapeake & Ohio and Jersey Central in the railroads.

May 17, 1904 - Southern Pacific common substituted for Minneapolis & St. Louis in the railroads.

June 25, 1904 - Wabash preferred and Metropolitan Street Railway substituted for C.C.C. & St. Louis and Denver preferred in the railroads.

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April 1, 1905 - U.S. Rubber 1st preferred substituted for U.S. Leather preferred in the industrials.

April 11, 1905 - Erie substituted for Wabash preferred in the railroads.

May 19, 1905 - Northern Pacific common and Norfolk & Western substituted for Manhattan and Union Pacific preferred in the railroads.

The rail list, now entirely composed of common stocks, had these issues:

 
May 4, 1906 - Twin City Rapid Transit substituted for Metropolitan Street Railway in the railroads.

November 7, 1907 - General Electric substituted for Tennessee Coal & Iron in the industrials.

August 25, 1912 - Rock Island and Lehigh Valley substituted for Brooklyn Rapid Transit and Twin City Rapid Transit in the railroads.

May 12, 1912 - Central Leather common substituted for Colorado Fuel & Iron in the industrials.

December 12, 1914 - Chesapeake & Ohio, Kansas City Southern and N.Y. N.H. & Hartford substituted for Chicago & North Western, Missouri Pacific and Rock Island in the railroads.

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March 16, 1915 - General Motors substituted for U.S. Rubber 1st preferred in the industrials.

July 29, 1915 - Anaconda substituted for Amalgamated Copper.

October 4, 1916 - A list of 20 industrials, all common, substituted for the old list of 12. National Lead, Peoples Gas, General Motors and U.S. Steel preferred were dropped and 12 new companies added. The list became: 

 
(At this time (1916) Stock Exchange quotations were all in dollars of percentages, so the fact that Utah had a par of $10 and Westinghouse a par of $50 caused no immediate confusion in the new averages. However, in order to make continuity for the industrial averages, the records of the 20 new stocks were figured backward to the reopening of the Stock Exchange on December 12, 1914, after the war closing, so that the published record of averages is as if the 20 stocks mentioned above had been quoted on the dollar basis from that date.)
March 1, 1920 - Corn Products substituted for American Beet Sugar in the industrials.

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January 22, 1924 - American Tobacco, Du Pont, Mack Trucks and Sears, Roebuck substituted for Corn Products, Central Leather, Goodrich and Texas Co. in the industrials.

February 6, 1924 - Standard Oil of California substituted for Utah in the industrials.

April 10, 1924 - Delaware, Lackawanna & Western and St. Louis Southwestern substituted for Kansas City Southern and Lehigh Valley in the railroads.

May 12, 1924 - Studebaker non-par and Woolworth $25 par substituted for old Studebaker and Republic Iron & Steel in the industrials.
(After the change from 12 to 20 industrials in 1916, Texas Co. reduced its par from $100 to $25. Then, American Locomotive changed from $100 par to non-par, issuing two new shares for one old share. Studebaker changed from $100 par to non-par, issuing two and a half shares of new for one of old. The compilation arising from the Texas, American Locomotive and Studebaker changes brought about new adjustment.
Texas Co. and Corn Products were dropped. American Locomotive was retained at the actual new quotation. These changes, made January 22, 1924, were so fitted into the scheme of quotations that, while the closing prices on a Tuesday averaged 97.41 on the old stocks, the average on the new stocks was 97.23, all being figured on the dollar basis.)

The railroad list as of August 31, 1925, was:

August 31, 1925 - General Motors, International Harvester, Kennecott, Texas Co. and U.S. Realty were substituted for Anaconda, Baldwin, Du Pont, Standard Oil of Calif. and Studebaker in the industrial list. These changes made no appreciable difference in the averages.

December 7, 1925 - Allied Chemical and Paramount Famous Lasky substituted for U.S. Realty and Westinghouse Electric in the industrials.

December 31, 1925 - Remington Typewriter and Mack Trucks, ex-stock dividend, were substituted for Kennecott and Mack Trucks stock dividend attached in the industrials.

March 16, 1927 - United Drug substituted for Remington Typewriter in the industrials. The industrial list on December 31, 1927, was:

All stocks used in both the railroad and industrial lists are common stocks. The averages of these stocks are compiled from closing prices. In case there is no sale of a particular stock the last closing is used.

As of December 31, 1927, to obtain the average daily price of the 20 railroad stocks, take the total sum of their closing quotations (with Pennsylvania and Reading doubled) and divide by 20. The industrial average is computed in the same manner except that in certain cases in the past (prior to 1927) attempt was made to compensate or average the averages to make allowances for stock split-ups. Therefore, in order to get the total to be divided by 20, the closing price of American Can is multiplied by 6, that of General Electric by 4, Sears, Roebuck by 4, American Car & Foundry by 2 and American Tobacco by 2.

The present Dow Jones industrial average of 30 stocks began October 1, 1928, when the list was expanded to 30 from 20 and several substitutions were made. On October 1, 1928, the stocks making up the industrial average were:

The divisor on October 1, 1928, was 16.67.
Subsequent changes in stocks making up the industrial average and changes in the divisor, together with the dates, were:

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