What Companies Make Up the Dow?

There are many indicators of the health of the stock market, such as the Dow. The Dow is one of the most important stock market indicators and is quoted on any stock market update. The Dow is a measure of the average price of 30 top stocks. The Dow Industrial Average has been around since 1896, and began with 12 companies determining the average. Slowly companies were added to the total and by 1928, there were 30 total companies included in the measurement index. 

As of 2010, the thirty companies that comprise the Dow industrial average are:

• MMM 3M Corporation: manufacture electrical coatings and sound media.
• AA Alcoa Aluminum: largest manufacturer of aluminum in the US
• MO Altria Group (formerly Philip Morris): tobacco, wine, investment capital
• AXP American Express Co.: consumer finance
• AIG  American Int’l Group, Inc.: insurance
• SBC AT&T Inc. (was SMC): telecommunications
• BA Boeing Co.: aerospace
• CAT  Caterpillar Inc.: commercial vehicles and trucks
• C CitiGroup: banks
• KO Coca Cola Co.: soft drinks
• DD E.I. DuPont de Nemours: commodity chemicals
• XOM Exxon Mobil Corp.: integrated oil and gas
• GE General Electric Co.: diversified industrial
• GM General Motors Co.: automobile manufacturer
• HPQ Hewlett-Packard Co.: computer hardware
• HD Home Depot Inc.: home improvement retailer
• HON Honeywell International Inc.: diversified industrial
• INTC Intel Corp.: semiconductors
• IBM International Business Machines Corp.: computer services
• JNJ Johnson and Johnson: pharmaceuticals
• JPM  JP Morgan Chase & Co.: banks
• MCD McDonald’s Corp: restaurant and bars
• MRK Merck & Co. Inc.: pharmaceuticals
• MSFT Microsoft Corp.: software
• PFE Pfizer Inc.: pharmaceuticals
• PG Proctor & Gamble Co.: nondurable household products
• UTX United Technologies Corp.: aerospace
• VZ Verizon Communications Inc.: fixed line telecommunications
• WMT Wal-Mart Stores Inc.: broadline retailers
• DIS Walt Disney Co.: broadcasting and entertainment

How Does the Dow Work?

To determine the Dow Industrial average, the average price of the stock for each of the thirty companies included on the Dow is summed and multiplied by a factor that is related to the splits that have occurred in the stock and the general health of the stock on the market. This gives an indication of the general health of the market.

Thus, choosing the companies that are on the Dow is important, because these companies are used to indicate the general market direction. Periodically, the exact companies that make up the thirty companies on the list change due to mergers or a company going out of business. 

Changes to the Dow

Over the history of the Dow, more changes have occurred since 1997 than ever before. Eleven major companies have been dropped from the Dow in favor of new companies to give an indicator of the behavior of the stock exchange and health of the economy. What does this all mean? The Dow average is a measure of what the prices of stocks are doing overall. When the economy is doing well, it is expected that the prices will rise. This causes the Dow to rise. If however, the economy is not doing well, the prices of stocks fall, yielding a falling Dow.

World Events and the Dow

If you notice a connection between world events and the direction of the Dow, you are right. Generally, especially when the U.S. is involved, events in the world that cause uncertainty in the course of the future cause the Dow to fall. When major events that are favorable, such as labor reports or government spending programs are announced, the Dow will go up.

If you examine the list of companies given as members of Dow, you will notice that a number of them were involved in the huge bailout during the economic crisis of 2008 and 2009. This should cause a wise investor to consider whether the Dow really gives a true estimate of stock prices and stability of the economy.

There are a number of similar indicators such as the S&P 500 and the Johnson 2000 that measure different sets of company stock prices. It is always a good practice to gain as much information as possible when deciding how to invest money. By nature, investing in the stock market is a risky proposition at best.