What Does Dow Stand For?
If you follow markets and trading, you have heard people refer to “The Dow”? There is more than one way to read the history of products, and dozens of ways to mark trends. What’s an investor to do? Learn about one aspect of the American economy... the Dow Jones Industrial Average.
The Dow, or simply Dow, is a nickname for the Dow Jones Industrial Average (DJIA), a familiar marker in the stock world. The DJIA is an index that records trading information for 30 big, United States-based companies. It has earned a reputation for being an accurate representation of the larger stock market. People around the world trust the DJIA and make investment decisions based on its actions. In that regard, the Dow is more than just the sum of its parts. In many ways, it is an institution unto itself.
The companies tracked can either be traded on the NYSE or with NASDAQ (formerly the National Association of Securities Dealers Automated Quotations; now simply known as NASDAQ). The companies included in the Dow span all types of industries, such as telecommunications, petroleum, technology and pharmaceuticals.
The analysts with the DJIA monitor trading activity for those companies and averages the results. The average is basically a snapshot of all stock activity on the U.S. markets. Some days, the average is up, and some days it drops, based on the activity and value of the companies included in the Dow.
History of the Dow
The Dow has a long history, having been started in the late nineteenth century. The DJIA is the product of the work of three men, Charles Dow, Edward Jones, and Charles Bergstresser. These men launched a small, hand-delivered newsletter for use by traders at the stock exchange.
This little flyer went on to become The Wall Street Journal in 1889. Because of their extensive knowledge of the stock market and their frequent writing and updates about trading, Dow and Jones started the Industrial Average in 1896. Included in the original average were companies leading industries such as railroads and utilities. The DJIA would fluctuate based on fluctuations for those 30 companies.
Companies on the Dow
These days companies tracked in the Dow include corporations such as The Home Depot, 3M, Coca-Cola, Johnson & Johnson, and McDonald’s. All of the companies included in the average are leaders in their respective industries. The companies included can change from time to time, as determined by shifts in markets and products. Since its inception, the Dow has been willing to change with the times. It is important to note that the Dow Jones Industrial Average is not a place where you can buy or sell stocks. It is simply an index that measures a few key companies. It paints a picture of the overall market trends, whether the market is moving up or down.
Other Dow Innovations
In addition to developing the very popular index, the Dow Jones company is responsible for other market-related hardware. The engineers at Dow Jones created the first motor-driven stock ticker, truly an iconic piece of stock market history. The ticker helped deliver real-time news to the Dow Jones offices so they did not have to wait for news (including stock activity) to come to them or send out reporters to find out what went on in the world.
Now that you are armed with some information about the Dow, you can better understand what happens in the stock market. While you are learning about the Dow, you should also know that one branch of the Dow has gone international. Global Down is an index that tracks 150 blue-chip stocks from nations around the planet.