Almost everyone has wondered: What is a Dow Jones Average? Is it a real person, a place or just a company nickname? Well, that’s all of the above. This is a weekday reading of 30 key US stocks indicating the evolution of the country’s business climate.
Charles Dow and Edward Jones met as writers at the Providence Evening Press. Jones could skilfully and quickly analyze a financial report. They are committed to reporting on Wall Street without bias. Other journalists of the day could be bribed to report favorably on a company in order to drive up stock prices. Dow and Jones refused to do so. They thought Wall Street needed a financial information bureau. In 1882, they created the company Dow, Jones & Co.
They have developed a complex trading news reporting system that allows investors and business owners to follow daily stock prices.
In 1883, the company launched a two-page afternoon business summary called Customers’ Afternoon Letter. Their daily inventory report included nine railroads, one steamship line and Western Union.
In 1889, the partners realized it was time to turn their two-page summary into a proper diary. They then founded the Wall Street Journal business daily. The first issue of the WSJ appeared July 8, 1889. It cost 2 cents per issue or $5 for a one-year subscription. Dow was the editor and Jones handled the office work.
Although his name was not on the Dow Jones logo, Charles Bergstresser became an important founding partner of the company. The company’s first headquarters was located in the basement of a candy store. Bergstresser chose to be a silent partner. His strength lay in his interviewing skills.
The Wall Street Journal has become one of the most respected financial publications in the world. In the WSJ, a series of principles were developed and published for understanding and analyzing market behavior, which later became the basis of technical analysis.
Charles Dow often warned reporters on his WSJ staff against trading biased stories for stock tips or free shares. In a crusade for honesty in financial reporting, Dow has released the names of companies that have been reluctant to disclose their profit and loss information. Soon after, the newspaper gained power and respect among readers.
Vermont Royster, a later WSJ editor, said, “Dow has always believed that business news was not the ‘private province of brokers and tycoons.’
Dow saw that a recession at the time was ending, so it came up with a simple tracking system to monitor the country’s daily business climate. By tracking the closing stock prices of 12 companies, adding up the stock prices and dividing the total by 12, Dow arrived at its “stock average.” In 1896, the first such average appeared in the WSJ. Later, Dow Jones Co. expanded the report to an index of 20 active stocks, which included 18 rail stocks and 2 non-rail stocks.
Today it has expanded and is known as the Dow Jones Industrial Average (DJIA).
In 1898, the WSJ was a morning daily covering more than financial news.
Unlike other newspapers, the WSJ reported on events such as the war without rhetoric. Dow also added editorial columns called “Review and Outlook” and “Answers to Inquirers” where readers sent in investing questions.
Jones retired in 1899, but Dow and Bergstresser remained. Dow continued to write editorials, focusing on the government’s position in American affairs. The WSJ set a precedent in reporting during the 1900 election by endorsing incumbent White House President William McKinley. He was re-elected with Theodore Roosevelt as Vice President.
In 1893, many mergers began to take place, resulting in the formation of huge corporations. These companies were looking for markets for their shares. The extremely speculative market meant that investors needed information on stock market activity, hence the active listing of shares became vital for investors.
Over the years, many companies have been added or subtracted based on a company’s financial condition. For example, K-Mart was discontinued a few years ago. General Electric and Western Union are the only companies that have survived the ups and downs of numerous DJIA stock quotes, and they are no longer among today’s Dow Industrial 30.
The current DJIA consists of 30 stocks and remains one of the oldest and most popular stock indices in the world. The stocks on the DJIA list are:
American Express
Amgen
Apple
Boeing
caterpillar
Chevron
Cisco
disney
Dow
Goldman Sachs
Home deposit
Honeywell
IBM
Intel
Johnson & Johnson
JPMorgan Chase
McDonald’s
Merck
Microsoft
Nike
Procter & Gamble
Minnesota Mining and Manufacturing
Salesforce.com
Travelers
United Health
Verizon
Visa
Walgreens
Walmart
To get the “average”, add up the daily stock prices in the list, then divide by 30. Whether you’re a small investor or a corporate CEO, or neither, watching the daily DJIA is your way to keep an eye on the pulse of the nation’s business health, and that’s certainly everyone’s business.
My thanks to Ken Klauber of Stifel, Nicolaus for providing the current 30 DJIA lists.
Tom Morrow is a longtime Oceanside-based journalist and author.
The columns represent the views of the individual author and do not necessarily reflect those of the ownership or management of North Coast Current.
