How Many Stocks Are in the Dow Jones Industrial Average?
The Dow Jones Industrial Average (DJIA) is the most widely reported U.S. stock index for the American economy. It is globally reported and viewed by many as the No.1 stock index for gauging the health of the American economy. While it historically measured just fluctuations in the economy, it can now be affected by global news since the companies represented in the DJIA usually have large global operations.
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History
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The Dow Jones Industrial Average is a stock market index created by reporters Charles Dow and Edward Jones of The Wall Street Journal. The DJIA was created to measure the industrial sector of the American economy; it has been used to measure economical factors of the U.S. economy for more than 100 years. The DJIA currently lists the 30 largest companies in the U.S. economy over a broad range of industry sectors, creating a "blue-chip" index that measures the leading companies of American industries.
Dow Jones Industrial Average
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The DJIA index is calculated by adding the prices of the component stocks and dividing by the number of stocks in the DJIA, currently 30. This is the original formula for the DJIA; it has gone through some changes in the divisor, which represents the number of stocks in the DJIA. While the DJIA does not represent every company in the stock market, it represents approximately 25 percent to 30 percent of the U.S. stock market. The DJIA is used with other stock indexes to help understand the state of the U.S. economy.
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Current DJIA Companies
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As of July, 2009 the 30 DJIA companies were:
3M, Alcoa, American Express, AT&T, Bank of America, Boeing, Caterpillar, Chevron, Cisco Systems, Coca-Cola, DuPont, Exxon Mobil, General Electric, Hewlett-Packard, Home Depot, Intel, IBM, Johnson & Johnson, JPMorgan Chase, Kraft Foods, McDonald's, Merck, Microsoft, Pfizer, Procter & Gamble, The Travelers Companies, United Technologies, Verizon, Wal-Mart Stores and Walt Disney Co.
General Electric is the only company in the DJIA today that was also in the original twelve companies. The DJIA is updated when companies go through major market changes; on June 1, 2009, General Motors and Citigroup were dropped from the list because of their company changes during the 2008-09 U.S. recession.
Disadvantages
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Some opponents of the DJIA do not believe that a major U.S. stock index should have only 30 companies represented in the formula. The size of these companies may skew the industry or falter when more competitors enter their market. Most proponents use the S&P 500 for their calculations of market returns, since 500 companies are represented in this index. Additionally, each company in the DJIA does not have the same market capitalization, where $1 gained in a smaller company can be negated by a $1 loss of a larger company, even though the gain/loss percentage is not equal.
Other Indexes
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The term "Industrial" is an original word from the early 1900s used to describe the companies in the DJIA. While most early companies were truly industrial businesses, the term is simply ignored by investors when using the DJIA for investment purposes. The DJIA is now just one index provided by The Wall Street Journal; the Dow Jones Transportation, Utility, and Global indexes provide information regarding these industries for investment purposes.
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