Investors looking to capitalize on that should consider buying some of the more promising blue chip stocks in the Dow Jones. For instance, Salesforce and Microsoft have strong market positions and solid growth prospects that could unlock plenty of value for patient shareholders. The DJIA launched in 1896 with just 12 companies, primarily in the industrial sector. They included railroads, cotton, gas, sugar, tobacco, and oil.
It reached a higher level the next day, at 36,952.65, but closed below its all-time high. This stock market index, also known as the Dow or DIJA, tracks 30 large blue-chip companies on the NYSE and Nasdaq. Although the Dow isn’t as big as the S&P 500 or the Nasdaq, neither of them has been as influential or popular enough to be the subject of a Broadway musical.
The index breached 26,000 on Jan. 17, then continued on to set 15 closing records in the rest of 2018. But this robust start was not indicative of extreme volatility the index would face as the year progressed. First, the conflict between Russia and Ukraine saw gas prices spike sharply.
A brief history of the Dow Jones from 1929–2013
The Dow Jones Industrial Average is a stock index of 30 U.S. blue-chip large-cap companies, which has become synonymous with the American stock market as a whole. The index, however, only has 30 companies, and the index itself is price-weighted, meaning that it does not always present an accurate reflection of the broader stock market. The Dow is not calculated using a weighted arithmetic average and does not represent its component companies’ market cap unlike the S&P 500. Rather, it reflects the sum of the price of one share of stock for all the components, divided by the divisor.
- At recent prices, the SPDR Dow Jones Industrial Average ETF returned 473% over the last two decades, or 9.1% annually.
- Still, there has never been as dramatic a fall as the Great Depression, in which the Dow lost nearly 90% of its value over just three years.
- Liquidity and distributions are not guaranteed, and are subject to availability at the discretion of the Third Party Fund.
- Also referred to as the Dow 30, the index is considered to be a gauge of the broader U.S. economy.
That said, when comparing the value of the DJIA over time, many financial sites, as we have done above, use an inflation-adjustment calculator such as the U.S. Bureau of Labor’s CPI since this gives the relative change over time. While you can’t directly buy shares in the market index, you can invest in the DJIA through index funds and exchange-traded funds (ETFs) such as the SPDR Dow Jones Industrial Average ETF Trust (DIA). These funds track the DJIA through a similar composition and weighting of stocks. Past performance is never a guarantee of future returns, but crossing the bull market threshold has historically been a good sign for stocks. Stock market gains since the 2008 financial crisis were mediocre in volume.
In fact, Morgan Stanley analyst Keith Weiss argues Microsoft in particular is the software company best positioned to monetize generative AI. But both could be long-term winners as more businesses seek productivity gains through automation. On Aug. 17, 1998, Russia https://www.forex-world.net/ devalued the ruble and defaulted on its bonds. By Aug. 31, the Dow had fallen 13%, from 8,714.64 on Aug. 18 to 7,539.06 on Aug. 31. The Long-Term Capital Management hedge fund almost collapsed, threatening to push its banking investors into bankruptcy.
The records set in the fall were the first ones since the Dow reached 26,616.71 on Jan. 26, 2018. After hitting the Jan. 26 peak, the Dow https://www.currency-trading.org/ went into free fall, dropping 4% the next week. On Feb. 8, it entered a market correction when it fell 1,032.89 points to 23,860.46.
Record Highs Set in 2013
So a higher percentage move in a higher-priced component will have a greater impact on the final calculated value. At the Dow’s inception, Charles Dow calculated the average by adding the prices of the 12 Dow component stocks and dividing by 12. Over time, there were additions and subtractions to the index that had to be accounted for, such as mergers and stock splits. At that point, a simple mean calculation no longer made sense. The Dow tracks 30 large, publicly owned blue-chip companies trading on the New York Stock Exchange and the Nasdaq. The selection is not based on strict quantitative criteria but rather on the decisions of the editors of The Wall Street Journal.
These changes are not done often to ensure the index’s stability and continuity. Previously, the Dow had fallen from 11,723 in January 2000 to 9,389 in March 2001, dropping 20% (from 20,520 to 16,434 points, inflation-adjusted). The bout of inflation that followed the COVID-19 pandemic led to another sharp sell-off in 2022. Between Jan. 7, 2022, and Sept. 30, 2022, the Dow declined from 36,231.66 to 28,725.51. It hit an all-time high of 34,200.67 points on April 16, 2021. In the autumn, it began to consistently close above 35,000 points, and by the last week in December 2021, it surpassed 36,000 points.
Dow Jones Industrial Average
The recession from 1973 to 1975 also led to a falloff for the Dow, which dropped 45% from its 1,051 peak in 1973 to just under 600 in 1974 (about 7,486 and 3,871 points, respectively, inflation-adjusted). The Dow also lost 26.5% during the Cuban missile crisis of 1962. At recent prices, the SPDR Dow Jones Industrial Average ETF returned 473% over the last two decades, or 9.1% annually.
The Dow suffered a market correction between August 2015 and April 19, 2016, leading to a 2016 downturn. It began on Jan. 4, when the Dow closed 160 points lower as investors worried about a slowdown in China’s economic growth. The index had three nine-day runs, last occurring in 1955 (when there were four nine-day stretches). The Dow continuously moved higher eight months in a row (the last occurrence of this was in 1995). This was the Dow’s third consecutive trading day with a record close and the fourth record closing in just two months. The previous high was recorded just a day prior, when the index ended the trading day at 36,585.06.
The Dow set two milestones in 2014 and set 39 closing records. Share repurchases among the S&P 500 companies were 59% higher in the first quarter of 2014 than the first quarter in 2013. It was the largest amount since 2007, right before the stock market crashed. The Dow started 2022 with a flourish, breaking closing records in the first two trading days of the year. The most recent record closing occurred on Jan. 4, when the index closed at 36,799.65, blowing past the all-time high closing of 36,585.06 it had just a day before.
Companies are chosen based on their reputation, growth, and relevance to the economy, with the aim of reflecting the overall health and trends of the industrial sector of the U.S. economy. The longest bull market in history lasted about 11 years, starting in March 2009 and ending in February 2020. Salesforce has been the leader in customer relationship management (CRM) software for 10 consecutive years, and the CRM market is forecast to grow by 14% annually through 2030. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. On Monday, Sept. 15, 2008, Lehman Brothers Holding, Inc. (an investment bank) declared bankruptcy.
The Dow is also a price-weighted index, as opposed to being weighted by market capitalization. This means that stocks in the index with higher share prices have greater influence, regardless if they are smaller companies overall in terms of market value. This also means that stock splits https://www.investorynews.com/ can have an impact on the index, whereas they would not for a market cap-weighted index. The Dow posted its all-time high during intraday trading on Feb. 23, 2024, reaching a peak of 39,282.28 points. The highest close occurred the same day when the index closed at 39,131.53 points.
A November streak occurred after Donald Trump’s presidential win on Nov. 8. Traders were confident in a business-friendly Republican president. The index closed above 23,000 on Oct. 18, 2017; slightly more than a month later, it broke 24,000. The Dow had two streaks lasting more than 10 days, which had not occurred since 1959. This high occurred only 42 trading sessions after closing above 19,000. That is the second-fastest rise in U.S. history (currently, the record is 24 sessions to go from 10,000 to 21,000 in 1999).