# Dow Jones Industrial Average: Map

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The Dow Jones Industrial Average also referred to as the Industrial Average, the Dow Jones, the Dow 30, or simply as the Dow; is one of several stock market indices, created by Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow. The average is named after Dow and one of his business associates, a statistician, Edward Jones. It is an index that shows how certain large, publicly-owned companies have traded during a standard trading session in the stock market. Dow compiled the index to gauge the performance of the industrial sector within the American economy. However, the performance of the Dow continues to be influenced by not only corporate and economic reports, but also by domestic and foreign political events such as war and terrorism, as well as by natural disasters that could potentially lead to economic harm. It is the second-oldest U.S. market index after the Dow Jones Transportation Average, which Dow also created. The average is computed from the Dow Jones Indexes by the stock price of 30 of the largest and most widely held public companies in the United States. The Industrial portion of the name is largely historical, as many of the modern 30 components have little or nothing to do with traditional heavy industry. The average is price-weighted, and to compensate for the effects of stock splits and other adjustments, it is currently a scaled average. The value of the Dow is not the actual average of the prices of its component stocks, but rather the sum of the component prices divided by a divisor, which changes whenever one of the component stocks has a stock split or stock dividend, so as to generate a consistent value for the index.

Along with the NASDAQ Composite, the S&P 500 Index, and the Russell 2000 Index, the Dow is among the most closely-watched benchmark indices tracking targeted stock market activity. Components of the Dow trade on both the NASDAQ OMX and the NYSE Euronext, two of the largest stock market companies. Derivatives of the Dow trade on the Chicago Board Options Exchange and through the CME Group, the world's largest futures exchange company.

## Companies included in the DJIA

The Dow Jones Industrial Average consists of the following 30 companies:

## Former components

The individual components of the DJIA are occasionally changed as market conditions warrant. When companies are replaced, the scale factor used to calculate the index is also adjusted so that the value of the average is not directly affected by the change. A summary of the more recent changes to the index include the following:
• On June 8, 2009, GM and Citigroup were replaced by The Travelers Companies and Cisco Systems, which became the third company traded on the NASDAQ to be part of the Dow.
• On September 22, 2008, Kraft Foods replaced AIG in the index.
• On February 19, 2008, Altria Group and Honeywell were replaced by Chevron and Bank of America. Previously a Dow component since 1985, Chevron's share price split-adjusted, had gained about 235% during the time it was no longer a component between 2003 and 2008; as the high price of petroleum helped to propel oil contracts towards the $150 per-barrel mark. Alternatively, the components that replaced it during that same time frame had each lost up to 30% of their values. Its conceivable that had Chevron been included within the index during this 5-year period, the Dow may well have surpassed the 15,000 point level. ## History The Dow Jones Industrial Average was founded by Charles Dow on May 26, 1896, and represented the average of 12 stocks from leading American industries. Previously in 1884, Mr. Dow had composed an initial stock average called the Dow Jones Averages; which contained nine railroads and two industrial companies that appeared in the Customer's Afternoon Letter, a daily two-page financial news bulletin which was the precursor to The Wall Street Journal. Of the original 12 stocks forming the Dow Jones Industrial Average compiled later in 1896; no longer railroad stocks, but purely industrial stocks, only General Electric is currently part of that index. The other 11 were: - American Cotton Oil Company, a predecessor company to Bestfoods, now part of Unilever. - American Sugar Company, became Domino Sugar in 1900, now Domino Foods, Inc. - American Tobacco Company, broken up in a 1911 antitrust action. - Chicago Gas Company, bought by Peoples Gas Light in 1897, now an operating subsidiary of Integrys Energy Group. - Distilling & Cattle Feeding Company, now Millennium Chemicals, a division of LyondellBasell, now in Chapter 11 bankruptcy. - Laclede Gas Company, still in operation as the Laclede Group, Inc., removed from the Dow Jones Industrial Average in 1899. - National Lead Company, now NL Industries, removed from the Dow Jones Industrial Average in 1916. - North American Company, an electric utility holding company, broken up by the U.S. Securities and Exchange Commission (SEC) in 1946. Steel in 1907. - U.S. Leather Company, dissolved in 1952. - United States Rubber Company, changed its name to Uniroyal in 1961, merged with private B.F. Goodrich in 1986, bought by Michelin in 1990. When it was first published, the index stood at 40.94, but ended up hitting its all-time low of 28.48 during the summer of 1896. Many of the biggest percentage price moves in the Dow occurred early in its history, as the nascent industrial economy matured. • On July 30, 1914, the average stood at a level of 71.42 when a decision was made to close down the New York Stock Exchange, and suspend trading for a span of 4 1/2 months. Some historians believe the exchange closed because of a concern that markets would plunge as a result of panic over the onset of World War I. An alternative explanation is that the Secretary of the Treasury, William Gibbs McAdoo, closed the exchange because he wanted to conserve the U.S. gold stock in order to launch the Federal Reserve System later that year, with enough gold to keep the U.S. at par with the gold standard. When the markets reopened on December 12, 1914, the index closed at 54, a drop of 24.39%. • In 1916, the number of stocks in the index was increased to twenty. Later in 1928, it was increased to thirty stocks near the height of the Roaring Twenties. The Crash of 1929 and the ensuing Great Depression returned the average to its starting point, almost 90% below its peak, by July 8, 1932, at its intra-day low of 40.56, closing at 41.22. The high of 381.17 on September 3, 1929, would not be surpassed until 1954, in inflation-adjusted numbers. However, the bottom of the 1929 Crash came just 2 1/2 months later on November 13, 1929, when intra-day it was at the 195.35 level, closing slightly higher at 198.69. • Marked by global instability, the 1930s contended with several consequential European and Asian outbreaks of war, leading up to catastrophic World War II; including the Spanish Civil War, the Second Italo-Abyssinian War, the Soviet-Japanese Border War and the Second Sino-Japanese War. On top of that, the U.S. was still dealing with the aftermath of the Great Depression. The largest one-day percentage gain in the index, 15.34%, happened on March 15, 1933, in the depths of the 1930s bear market. However, as a whole, it's not surprising the Dow posted some of its worst performance for a negative return. For the decade, the average was down from around the 286 level to 148, a loss of about 48%. • Post-war reconstruction during the 1940s, along with renewed optimism of peace and prosperity, brought about a 39% surge in the Dow from around the 148 level to 206. The strength in the Dow occurred despite other global conflicts which started a short time later including the Chinese Civil War, the Greek Civil War, the Indo-Pakistani War of 1947 and the 1948 Arab-Israeli War. • During the 1950s, the Korean War, the Algerian War, the Cold War and other political tensions such as the Cuban Revolution, as well as widespread political and economic changes in Africa during the initial stages of European Decolonization, did not stop the Dow's bullish climb higher. An astounding 200% increase in the average from a level of 206 to 616 ensued over the course of that decade. • The Dow's bullish behavior began to stall during the 1960s as the U.S. became entangled with foreign political issues such as the Bay of Pigs Invasion involving Cuba, the Vietnam War, the Portuguese Colonial War, the Colombian Civil War which the U.S. assisted with short-lived counter-guerrilla campaigns, and domestic issues such as the Civil Rights Movement. For the decade though, the average still managed a respectable 30% gain from the 616 level to 800. • On November 14, 1972 the average closed above the 1,000 mark (1,003.16) for the first time, during a brief rally in the midst of a lengthy bear market. • Between January 1973 and December 1974, the average lost 48% of its value in what became known as the 1973-1974 Stock Market Crash. The situation was exacerbated following the events surrounding the Yom Kippur War and the 1973 Oil Crisis which followed it soon after. And although the Vietnam War ended in 1975, new tensions arose towards Iran surrounding the Iranian Revolution in 1979. However, other notable disturbances such as the Lebanese Civil War, the Ethiopian Civil War, the Indo-Pakistani War of 1971 and the Angolan Civil War which the U.S. and Soviet Union considered critical to the global balance of power, seemed to have had little influence towards the financial markets. Performance wise for the 1970s; gains remained virtually flat, rising less than 5% from about the 800 level to 838. The 1980s and especially the 1990s saw a very rapid increase in the average, though severe corrections did occur along the way. • The largest one-day percentage drop occurred on Black Monday; October 19, 1987, when the average fell 22.61%. There were no clear reasons given to explain the crash, but program trading appeared to be a major contributing factor. • On October 13, 1989, the Dow stumbled into another downfall, the 1989 Mini-Crash which initiated the collapse of the junk bond market as the Dow registered a loss of almost 7%. However, for the rest of the 1980s as a whole, the Dow made a profound 228% increase from the 838 level to 2,753; despite the market crashes and other political distractions such as the Soviet War in Afghanistan, the Falklands War, the Iran-Iraq War, the Second Sudanese Civil War and the First Intifada in the Middle East. • The 1990s brought on rapid advances in technology along with the introduction of the dot-com era. Certain influential foreign conflicts such as the 1991 Soviet coup d'état attempt which took place as part of the initial stages of the Dissolution of the USSR and the Fall of Communism; the First and Second Chechen Wars, the Persian Gulf War and the Yugoslav Wars failed to dampen economic enthusiasm surrounding the ongoing Information Age and the "Irrational Exuberance" (a phrase coined by Alan Greenspan) of the Internet Boom. Even the occurrences of the Rwandan Genocide and the Second Congo War, which was termed as "Africa's World War" that involved eight separate African nations; didn't seem to have any noticeable negative financial impact on the Dow either. • Between late 1992 and early 1993, the Dow staggered through the 3,000 level making only modest gains as the Biotechnology sector suffered through the downfall of the Biotech Bubble; as many biotech companies saw their share prices rapidly rise to record levels and then subsequently fall to new all-time lows. • On November 21, 1995, the DJIA closed above the 5,000 level (5,023.55) for the first time. • Over the following two years, the Dow would rapidly tower above the 6,000 level during the month of October in 1996, and the 7,000 level in February 1997. • On its march higher into record territory, the Dow easily made its way through the 8,000 level in July 1997. However, later in that year during October, the events surrounding the Asian Financial Crisis plunged the Dow into a 554 point loss to a close of 7,161.15; a retrenchment of 7.18% in what became known as the 1997 Mini-Crash. • The Dow would go on to surpass the 9,000 level during the month of April in 1998, making its sentimental push towards the symbolic 10,000 level. • On March 29, 1999, the average closed above the 10,000 mark (10,006.78) after flirting with it for two weeks. This prompted a celebration on the trading floor, complete with party hats. The scene at the exchange made front page headlines on many U.S. newspapers such as The New York Times. • On May 3, 1999, the Dow achieved its first close above the 11,000 mark (11,014.70). Total gains for the decade exceeded 315%; from the 2,753 level to 11,497. The Dow averaged a 5.3% return compounded annually for the 20th century, a record Warren Buffett called "a wonderful century"; when he calculated that to achieve that return again, the index would need to close at about 2,000,000 by December of 2099. Even during the height of the dot-com era, authors James K. Glassman and Kevin A. Hassett went so far as to publish a book entitled Dow 36,000. Their theory was to imply that stocks were still cheap and it was not too late to benefit from rising prices during the Internet boom. The uncertainty of the 2000s brought on a significant bear market. Characterized first by extreme fear on the part of newer investors, then by indecision on whether the following cyclical bull market represented a prolonged temporary bounce or a new long-term trend. Ultimately, there was widespread resignation and disappointment as the lows were revisited, and in some cases, surpassed near the end of the decade. • On January 14, 2000, the DJIA reached a record high of 11,750.28 in trading before settling at a record closing price of 11,722.98. These two records would not be broken until October 3, 2006. • The third largest one-day point drop in DJIA history, and largest at the time, occurred on September 17, 2001, the first day of trading after the September 11, 2001 attacks, when the Dow fell 684.81 points, or 7.1%. By the end of that week, the Dow had fallen 1,369.70 points, or 14.3%. A recovery attempt allowed the average to close above the 10,000 level for the year. • During 2003, the average remained subdued within the 7,000 to 9,000 point level range by the Early 2000s Recession, the Afghan War and the Iraq War. But by December of that year, the Dow remarkably returned to the 10,000 mark. • On January 9, 2006 the average broke the 11,000 barrier for the first time since June 2001. • In October 2006, four years after its bear market low, the DJIA set fresh record theoretical, intra-day, daily close, weekly, and monthly highs for the first time in almost seven years, closing above 12,000 for the first time on the 19th anniversary of Black Monday (1987). • On February 27, 2007, the Dow Jones Industrial Average fell 3.3% (415.30 points), its biggest point drop since 2001. This move was part of a correction that eventually reached below the 12,000 level. It foreshadowed increased levels of volatility not seen since March 2003, including routine 1% moves and occasional moves of greater than 2% in a single session, which continued throughout the year. The initial drop was caused by a global sell-off after Chinese Stocks experienced a mini-crash, yet by April 25, the Dow passed the 13,000 level in trading and closed above that milestone for the first time. • On July 19, 2007, the average passed the 14,000 level, completing the fastest 1,000-point advance for the index since 1999. One week later, a 450 point intra-day loss, owing to turbulence in the U.S. sub-prime mortgage market and the soaring value of the yuan, initiated another correction falling below the 13,000 mark, about 10% from its highs. • On October 9, 2007, the Dow Jones Industrial Average closed at the record level of 14,164.53. Two days later on October 11, the Dow would trade at its highest intra-day level ever, at the 14,198.10 mark. In what would normally take many years to accomplish; numerous reasons were cited for the Dow's extremely rapid rise from the 11,000 level in early 2006, to the 14,000 level in late 2007. They included future possible takeovers and mergers, healthy earnings reports particularly in the tech sector, and moderate inflationary numbers; fueling speculation the Federal Reserve would not raise interest rates. Roughly on par with the 2000 record when adjusted for inflation, this represented the final high of the cyclical bull. • On July 2, 2008, with record-high oil and gasoline prices well above$140 per barrel and almost $5 per gallon, the Dow Jones Industrial Average closed in bear market territory. Two weeks later, its subsequent close below the 11,000 mark for the first time since 2006 was followed by a 500-point rally that accompanied a three-day 15% correction in energy prices. • The Russia–Georgia War in August of 2008, had minor implications in the financial world by briefly putting moderate pressure on petroleum prices, the Dow and stocks in general, due to a fear of a possible slowdown or stoppage in oil shipments. The Baku-Tbilisi-Ceyhan Pipeline, which runs through southern sections of Georgia was considered a critical component in reducing the West's reliance on Middle Eastern oil by circumventing Russia and Iran. • On September 15, 2008, a wider financial crisis became evident when Lehman Brothers filed for Chapter 11 bankruptcy. The DJIA lost more than 500 points for only the sixth time in history, returning to its mid-July lows below the 11,000 level. A series of "bailout" packages, including the Emergency Economic Stabilization Act of 2008, proposed and implemented by the Federal Reserve and U.S. Treasury, as well as FDIC-sponsored bank mergers, did not prevent further losses. After two months of extreme volatility, during which the Dow experienced its largest one day point loss, largest intra-day range and largest daily point gain, the index closed at a new six-year low of 7,552.29 on November 20. The market proceeded with a modest rise to close the year near the 9,000 level, still its worst annual performance since the early 1930s. • Throughout February 2009, amidst further deterioration in the banking sector, grim economic news, and market doubts as to the effectiveness of further government intervention, the bear market entered another acute phase, as the DJIA methodically approached and surpassed its October 2002 lows. It closed the month just above the 7,000 level, a nominal loss of half its peak value. On March 2, 2009, due to more bad news from AIG and the promise of another bailout for the insurance company, the DJIA dropped below 7,000 for the first time since 1997. By March 9, 2009, the DJIA reached a closing low at 6,547.05 (after an intra-day low of 6,469.95 during the March 6 session), its lowest close since April 1997, and had lost 20% of its value in only six weeks. Towards the latter half of 2009, the average rallied towards the 10,000 level amid optimism that the Late-2000s Recession, the United States Housing Bubble and the Global Financial Crisis of 2008-2009, were easing and possibly coming to an end. ## Investing Investing in the DJIA is made widely accessible through exchange-traded funds (ETFs) as well as in derivatives through option contracts and futures contracts. Within the equities world, asset manager SSgA State Street Global Advisors, offers a family of ETFs the SPDRs; one of which attempts to match the daily performance of the index, the DIAMONDS, introduced in 1998 ( ). Another asset management firm, ProFunds, offers other related DJIA ETFs through ProShares such as the 2x ( ), which attempts to match the daily performance of the DJIA by 200% and the Inverse 2x ( ), which attempts to match the inverse daily performance by 200%. ProFunds also issues Inverse Performance ( ) for a bearish strategy on the average. That is, when the Dow trades in negative territory, the ETF trades higher; thus, making it not needed to sell short if one has a bearish goal in mind. In the case of 2x performance, the ETF increases the buying power by leveraging money without using margin. Of course, short selling and buying as well as shorting on margin, are allowed and not discouraged. In regard to using margin on a 2x performance ETF, that would result in leveraging an investment by 400%. Although it may substantially increase the profit on an investment, it would however also expose an investor to a potential loss risk four times as great and possibly result in a margin call four times as fast.Currently, there are also 3x Performance ETFs that exist too; such as those offered by asset manager Direxion through Direxionshares in conjunction with such indices as the small-cap benchmark Russell 2000 Index. However, there are no ETFs as of yet that attempt to replicate 3x performance (300% leverage) or (600% leverage by applying margin), against the Dow. The introduction of 3x performance ETFs in connection with the DJIA may change in the future with further interest and demand from the investing public. In the derivatives market, the CME Group through its subsidiaries the Chicago Mercantile Exchange (CME) and the Chicago Board of Trade (CBOT), issues Futures Contracts; including the E-mini Dow ($5) Futures (YM), the DJIA ($10) Futures (DJ) and the Big Dow DJIA ($25) Futures (DD) which track the average and trade on their exchange floors respectively. Trading is typically carried out in an Open Outcry auction, or over an electronic network such as CME's Globex platform.

The Chicago Board Options Exchange (CBOE) issues Options Contracts on the Dow through the root symbol DJX in combination with long term expiration options called DJX LEAPS. Concerning equities, the exchange issues options contracts on DJIA ETFs, Inverse ETFs, Inverse Leveraged ETFs and Leveraged ETFs.

## Calculation

To calculate the DJIA, the sum of the prices of all 30 stocks is divided by a Divisor, the Dow Divisor. The divisor is adjusted in case of stock splits, spinoffs or similar structural changes, to ensure that such events do not in themselves alter the numerical value of the DJIA. Early on, the initial divisor was composed of the original number of component companies; which made the DJIA at first, a simple arithmetic average. The present divisor, after many adjustments, is less than one (meaning the index is larger than the sum of the prices of the components).That is:
\text{DJIA} = {\sum p \over d}
where p are the prices of the component stocks and d is the Dow Divisor.

Events like stock splits or changes in the list of the companies composing the index alter the sum of the component prices. In these cases, in order to avoid discontinuity in the index, the Dow Divisor is updated so that the quotations right before and after the event coincide:

\text{DJIA} = {\sum p_\text{old} \over d_\text{old} } = {\sum p_\text{new} \over d_\text{new} }.