When you hear financial commentators talking about “the market”, they’re generally talking about the Dow Jones Industrial AverageGlossary: An index of 30 large, well-known US companies. Unlike most indexes it is weighted by share price rather than company size.. The Dow Jones Industrial Average, often referred to as ‘the Dow’, is one of the oldest most watched stock market indices in the world and a key indicator of the health of the U.S. economy.
The Dow is a price-weighted index that tracks the performance of 30 large publicly owned companies trading on both the New York Stock Exchange (NYSE) and the NASDAQ. ‘Price-weighted’ means that the Dow average is calculated based on the stock price of its component companies, meaning that a higher-priced stock has a greater impact on the index’s daily movements than a lower-priced stock.
The Dow was created on May 26, 1896 by Charles Dow and Edward Jones. Back then, the index tracked just 12 companies primarily focused in the industrial sectorGlossary: One of the 11 groups the stock market is split into by line of business, like technology, healthcare or energy. Every company in the S&P 500 belongs to exactly one.: railroads, agricultural companies, gas, and oil companies dominated the list back then.
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