"The Dow" and "the market" are often used to describe fluctuations in the prices of company stocks. Both originated with the New York Stock Exchange, which for decades was the dominant stock trading system. Today both incorporate other aspects, such as the Nasdaq automated market. "The Dow" actually is the Dow Jones industrial average, one sector of Dow indexes that are used to indicate stock market trends.
Charles H. Dow, a co-founder of The Wall Street Journal, initiated a stock average in 1896 as a benchmark for the direction of stock prices. It originally had 12 stocks. Over the years, the industrial average was expanded to 30 stocks and two other sectors were added: transportation with 20 companies, and utilities with 15. Combined they form the Dow Jones Composite Average.
Today, Dow Jones sector indexes classify stocks in four levels: 10 broad industries, 19 supersectors, 41 sectors and 114 subsectors. The oil and gas industry, for instance, has a single supersector, oil and gas, with three sectors: producers, equipment and services and alternative energy. Each sector is split into two subsectors on specific fields.
Now the Dow Jones Indices are a family of 830,000 indexes covering a wide range of assets around the world. It is largely owned by McGraw-Hill, publisher of the Standard & Poor's family of investment publications and producer of the Standard & Poor's 500 index, another major indicator of market activity. The two dominant index companies merged in June of 2012.
Until 1999, the DJIA covered only NYSE issues, but that year Microsoft and Intel from the Nasdaq market were added. The average is "weighted," so it is not computed by simply adding the prices of the stocks and dividing by 30. The 30 stocks make up about 30 percent of the total market capitalization. Of the 12 stocks in the original Dow Jones industrial average, only General Electric remains a component.
Bob Haring has been a news writer and editor for more than 50 years, mostly with the Associated Press and then as executive editor of the Tulsa, Okla. "World." Since retiring he has written freelance stories and a weekly computer security column. Haring holds a Bachelor of Journalism from the University of Missouri.