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The Dow celebrates its 120th birthday

by Greg Klein | May 26, 2016

The Dow celebrates its 120th birthday

A chart shows how each industry contributed to the average since 1992.
(S&P Dow Jones Indices)


Long gone are the days when an analyst for the Dow Jones Industrial Average “would pull ticker tape from the machine, bloodying his hands while furiously calculating the gauge on which the markets hung,” says the firm’s anniversary promo. “By contrast, S&P Dow Jones Indices—the owner and publisher of the DJIA—now calculates over one million indices using an advanced calculation platform with operation centres around the globe.” On May 26 S&P celebrated 120 years of the benchmark created by Charles Dow and Edward Jones in 1896.

That was a somewhat tumultuous year in American history, as two presidential candidates fought over the gold standard and other economic issues. Resulting anxiety wiped over 30% from the new index.

Charles and Edward actually began with the 11-stock Dow Jones Railroad Average, since evolved into the Dow Jones Transportation Average. The railway list complemented their Customer’s Afternoon Letter, the precursor to the Wall Street Journal. The DJIA began with 12 stocks, grew to 20 in 1916 and reached the present level of 30 in 1928. Nasdaq stocks joined in 1999, towards the end of the index’s best decade. Not exactly open to junior explorers, listings are limited to large- and mega-cap companies. As of March 31 their capitalizations averaged $86.08 billion, compared with $37.37 billion for the S&P 500.

Of the original dozen companies, General Electric remains as the only survivor under the same name, although its presence hasn’t been continuous. GE was dropped twice prior to 1907.

Meanwhile the pace accelerates. Although the index took 76 years to close on 1,000 points, it needed less than 12 months to bolt from 9,000 to 10,000 in 1999. That same year the DJIA jumped to 11,000 in just 24 days. The speed of each 1,000-point climb continues to hasten.

A bi-polar year, 2008 recorded five of the benchmark’s 10 best days and four of its worst by points. By percentage, the early Depression years of 1929 to 1933 held seven of the 10 best days and five of the worst.

Commemorating the anniversary while symbolizing market swings, green and red lights blazed on the Empire State Building the night of May 25. Honchos from S&P and some DJIA companies rang the May 26 NYSE closing bell.

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