A brief History of the Dow Jones Industrial Average

The DJI is an important index to help to better communicate the state of the larger U.S. market between investors, journalists, and anyone who cares to follow financial news. It is a finger on the pulse of the United States Stock Exchange, perhaps one of the most important and heavily traded financial market in the world.

CHARLES DOW,(1851-1902)

Charles Dow, giving the DJI its primary nickname, wasn’t even a stock broker or initially a financial specialist. A poor farmer’s son, Dow wanted to have something other than the hard farming life that killed his fathet by the time Charles was six years old. With no formal training in journalism or much formal education, Dow managed to find work as a reporter for newspapers including The Springfield Daily Republican and The Providence Journal.

After a move to New York City with a news agency, he became interested in financial reporting. He found the system of share prices overly symbolic and hard for the average person to understand. So partnering with Edward Jones and Charles Bergstresser, he founded Dow Jones and Co. and began writing a financial publication in 1883. In 1989 the company launched “The Customer’s Afternoon Letter” which was to eventually become the Wall Street Journal.

Dow’s biggest contribution was finding a way to apply his knowledge of farming to his evolving interest in business. When Wall Street first drew his attention, the hot speculator’s market was commodities. It was popular with traders because the prices used for speculation were the actual prices of the commodities themselves (pork barrels at 30 cents, etc.) He noticed that the reason that other kinds of financial speculation and reporting never took off is that other companies were necessarily more symbolic in their share price. Traders found it a bit meaningless to trade a paper company stock at a dollar and a quarter.


As it is today, when the DJI started it was a selective representation of then a dozen stocks, including a large number of railroad stocks – the big business to be in at the time.
When Dow first published the average, it registered at about forty dollars. But things changed, and the railroad and steamship companies that were all the rage at the time soon lost their luster with the development of other technologies. Later that year it stood at just over 24 dollars.

In the nineteen twenties the Dow and stocks in general saw a huge run up, with the peak that decade at 381.17. But in the midst of the Great Depression the Dow had fallen with the market and the nation’s prospects to just over twenty percent of its high. Later decades would see vacillation, but with legislation to control market activity, fortunately no movements quite as dramatic.


In 1973, the DJI crossed the magic one thousand mark, after having a hard time doing it because of what financiers called “quadraphobia.” Accounting for periodic highs and lows, it has been straight up from there and today it stands at over 12 thousand.

There have been changes to the DJI over the years with the changing times and business interests of the nation. Gradually the railroads were spun off into their own average, now called the Dow Jones Transportation Index. Utilities were also spun off into the Dow Jones Utilities index.

The DJI today consists of 30 ‘Blue Chip’ stocks, including mainstays like AT&T, Caterpillar, Chevron and Intel. One of the continuing criticisms that the DJI has had through its history is still unresolved – whether the fates of this small number of companies is really as symbolically representative of the financial state of the nation as it seems to have become in the minds of the public. This is especially a concern because of additional spin offs of crucial companies such as those technology companies that now comprise the NASDAQ index.

No one knows for sure the future of this magic number or the larger stock market it mirrors. Current values have in recent decades soared to heights that make the run up and following plunge of the 1920’s look minuscule. But whatever the case, because of the innovation of Charles Dow, followers of the market, professional or amateur, will be able to inform themselves with this useful way to check the pulse of the state of The United State’s financial health.