The Dow Jones Industrial Average has reached 125 years old. The index was created in 1896, and has evolved through Great Depressions, recessions, and booms to take on its current form. Karen Langley and Peter Santilli report in The Wall Street Journal:
One hundred twenty-five years ago, the Dow Jones Industrial Average made its debut.
The index of 12 smokestack companies closed that first trading day, May 26, 1896, at 40.94. It included General Electric Co. as well as long-forgotten names like American Cotton Oil and Distilling & Cattle Feeding.
Since then, the Dow has evolved with the U.S. economy, giving investors from Wall Street to Main Street a measure of financial markets through the Great Depression, two world wars and all the events that shaped the 20th and early 21st centuries.
It has risen an average of 7.69% each year and notched 1,464 record closes, according to Dow Jones Market Data. It climbed above 100 in 1906, topped 1000 in 1972 and crossed 10000 in 1999. Just this year, as the U.S. economy continued to shake off its pandemic-induced slowdown, the Dow bounded above every milestone from 31000 to 34000.
The ascent has included numerous interruptions: There have been 70 years with no record closes, including the span from 1930 through 1953, as the stock market languished beneath its 1929 highs. There have been four years—1910, 1962, 1977 and 2008—in which the average closed each trading day below the previous year-end level. One day in October 1987, the Dow plummeted 22.6%, its only session worse than one last March during the coronavirus panic when it dropped 12.9%.
Over the long run, as the economy expanded and companies delivered growing profits, the Dow, and the broader U.S. stock market, have marched higher.
“The stock markets of the United States have been robust instruments because they are being driven by what certainly has been a historically robust economy,” said Randall Eley, president and chief investment officer of asset manager Edgar Lomax Co. Though there have been declines along the way, “for the most part, those declines simply look like blips now in history,” he said.
The Dow has grown from the industrial-focused gauge created by Charles Dow, the first editor of The Wall Street Journal, to help explain stock-market movements to his readers. Its roster expanded to 20 names in 1916 and 30 names—where it stands today—in 1928.
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