The Dow Jones Industrial Average (DJIA), often simply called “the Dow,” is one of the oldest and most commonly referenced stock market indices in the United States. Established in 1896 by Charles Dow and Edward Jones, the DJIA tracks the stock prices of 30 large, well-established U.S. companies across various industries. These companies are considered leaders in their respective sectors, representing key elements of the U.S. economy.
Unlike some indices that are market capitalization-weighted (like the S&P 500), the DJIA is price-weighted. This means that companies with higher stock prices have a greater influence on the index’s movement, regardless of their overall market value. The DJIA’s value is calculated by adding the prices of its 30 component stocks and then dividing by a divisor that is adjusted for stock splits and other structural changes to maintain continuity.
The Dow serves as a barometer for the health of the U.S. stock market and broader economy, often influencing investor sentiment and media coverage. It helps investors understand market trends and compare the performance of individual stocks or portfolios against the broader market.
Historically, the DJIA has evolved significantly. Originally composed of 12 companies, it expanded to 30 in 1928 to encompass a wider range of industries. The mix of companies changes periodically to reflect the dynamic nature of the economy and emerging sectors. For example, companies from technology and consumer services sectors have been included to better reflect current economic drivers.
Investors should note that because the DJIA is price-weighted, it may not always provide the most accurate picture of overall market capitalization trends, which is why many also reference the S&P 500 when assessing market performance. For more details on broader market indices, see our S&P 500 glossary entry.
As of 2025, the DJIA remains a crucial benchmark for investors, financial professionals, and economists tracking U.S. market conditions and economic trends. It appears in financial news daily and can impact investment decisions and economic forecasts.
For authoritative information, you may also visit the official resource at the Dow Jones Indexes website.
