We all know that the Dow Jones Industrial Average (DJIA) is an index that tracks the performance of the stock market, but do you ever wonder how it came into existence? A closer look at the Dow Jones Average history reveals that it was founded in 1896 by Mr. Charles Dow as a collection of a dozen stocks that spanned the various industries of the time. You may be surprised to learn that of the original twelve, only General Electric remains part of the DJIA as it exists today.
What Happened to the Other 11 Companies?
Five of the companies changed names or were bought out. American Cotton Oil Company is now a division of Unilever, American Sugar Company is now Domino Foods, Inc., and the Chicago Gas Company is currently operated by Integrys Energy Group. The Tennessee Coal, Iron and Railroad Company was bought out by US Steel in 1907, and the US Rubber Company went through several name changes and mergers before being bought by Michelin just recently in 1990. Two of the companies, Laclede Gas Company and National Lead Company were simply removed from the DJIA in 1899 and 1916, respectively. The remaining four companies were the American Tobacco Company, Distilling & Cattle Feeding Company, North American Company, and the US Leather Company. Each of these four either dissolved or has filed for bankruptcy.
The Early DJIA
The Panic of 1896 marks the lowest level in the Dow Jones Average history. The index hit 28.48 points that summer, down from 41 point mark it held when created. There wasn’t much of a rise through the early 1900s. The 1906 earthquake in San Francisco and the Russo-Japanese War didn’t impact the index much, as it sat steadily in the 50-100 range. Even the World War I recession left the DJIA unscathed, closing out the 1910s around 105. With the Roaring Twenties, the Dow was expanded to include stocks from 30 companies. The index hit a high of 381.17 in September 1929, just before the stock market crash and the Great Depression. A 48% loss was recorded in the 1930s, the first decade-spanning loss in the Dow Jones Average history.
The US recessions and national affairs over the next several decades had only a minor impact on the DJIA. The index recovered 200% in the 1950s to exceed its pre-depression value, and reached 800 by the end of the 1960s. The stock market was fairly stagnant during the 1970s as the US dealt with foreign relations in the Middle East
Dow Jones Average History from 1980 to Today
The greatest single-day drop in the Dow Jones Average history occurred on Black Monday in October of 1987 when the average dropped by 22.61%. Investors who rode out the brief decline enjoyed more than a 220% increase in the 1980s, with the Dow rising above the 2500 level. The focus on science and technology in the 1990s and through to today has been the shining star in the Dow Jones Average history. Traders celebrating the first time closing of the DJIA above 10,000 on March 29, 1999. The Dow has been more volatile over the last few years as investors lost some confidence in the stock market, but the index continues to hover around the 10,000 mark today.