The importance of Dow Jones Industrial (DJIA) and statistics of best and worst years

The Dow, the oldest continuing U.S. market index, is a way of measuring the combined stock values of 30 big U.S. companies. It's one of several stock market indices created by nineteenth-century Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow. Dow compiled the index to gauge the performance of the industrial sector of the American stock market. It is the second-oldest U.S. market index, after the Dow Jones Transportation Average, which Dow also created.

COMPUTATION 

The computation for the index is derived from a mathematical formula to adjust for things like stock splits — when a company changes the number of shares its stockholders have and adjusts the price — or new companies being added or removed. The idea is to keep the index consistent over time, and to make sure today's value can be compared in a meaningful way to what it was a year ago or 10 years ago.

This can be done various ways mathematically, but at Dow Jones it is handled by changing the "divisor" — a number that is divided into the total of the stock prices. That divisor currently stands at 0.1255527090.

COMPOSITION 

The 30 dow components as of now include: 3M, Alcoa, American Express, AT&T, Bank of America, Boeing, Caterpillar, Chevron, Citigroup, Coca-Cola, DuPont, ExxonMobil, General Electric, General Motors, Hewlett-Packard, Home Depot, Intel, IBM, Johnson & Johnson, JPMorgan Chase, Kraft Foods, McDonald's, Merck, Microsoft, Pfizer, Procter & Gamble, United Technologies, Verizon Communications, Wal-Mart and Walt Disney.

When it was first published, the index stood at 40.94

INDEX HISTOR

What were removed and replaced: On November 1, 1999, Chevron, Goodyear Tire and Rubber Company, Sears Roebuck, and Union Carbide were removed from the DJIA and replaced by Intel, Microsoft, Home Depot, and SBC Communications. Intel and Microsoft became the first two companies traded on the NASDAQ exchange to be listed in the DJIA. On April 8, 2004, another change occurred as International Paper, AT&T, and Eastman Kodak were replaced with Pfizer, Verizon, and AIG. On December 1, 2005, AT&T returned to the DJIA as a result of the SBC Communications and AT&T merger. Altria Group and Honeywell were replaced by Chevron and Bank of America on February 19, 2008. On September 22, 2008, Kraft Foods replaced American International Group in the index.

IMPORTANCE

It has been a widely followed indicator of the stock market and overall health of the economy since October 1, 1928. Some on Wall Street downplay the importance of the average because it isn't as broad a measure as counterparts like the Standard & Poor's 500 index, which reflects the performance of 500 companies' stocks.

Analysts generally believe it is a useful tool when combined with other market indicators, including the S&P 500 and the Nasdaq index.

SOME INTERESTING STATISTICS

There are two ways to measure: index points and percentage change. Here are tables of the biggest one-day rises in both terms.
Days with Greatest Net Gain
Rank Date Close Net Chg. % Chg.
1 10/13/2008 9387.61        936.42          11.08         
2 03/16/2000 10630.60        499.19          4.93         
3 07/24/2002 8191.29        488.95          6.35         
4 09/30/2008 10850.66        485.21          4.68         
5 07/29/2002 8711.88        447.49          5.41         
6 03/18/2008 12392.66        420.41          3.51         
7 03/11/2008 12156.81        416.66          3.55         
8 09/18/2008 11019.69        410.03          3.86         
9 04/05/2001 9918.05        402.63          4.23         
10 10/16/2008 8979.26        401.35          4.68         
Days with Greatest Percentage Gain
Rank Date Close Net Change % Change
1 03/15/1933 62.10        8.26          15.34         
2 10/06/1931 99.34        12.86          14.87         
3 10/30/1929 258.47        28.40          12.34         
4 09/21/1932 75.16        7.67          11.36         
5 10/13/2008 9387.61        936.42          11.08         
6 10/21/1987 2027.85        186.84          10.15         
7 08/03/1932 58.22        5.06          9.52         
8 02/11/1932 78.60        6.80          9.47         
9 11/14/1929 217.28        18.59          9.36         
10 12/18/1931 80.69        6.90          9.35         

 

There are two ways to measure: index points and percentage change.
Here are tables of the biggest one-day declines in both terms.

Days with Greatest Net Loss

Rank Date Close Net Change % Change
1 09/29/2008 10365.45        -777.68        -6.98       
2 10/15/2008 8577.91        -733.08        -7.87       
3 09/17/2001 8920.70        -684.81        -7.13       
4 10/09/2008 8579.19        -678.91        -7.33       
5 04/14/2000 10305.77        -617.78        -5.66       
6 10/27/1997 7161.15        -554.26        -7.18       
7 08/31/1998 7539.07        -512.61        -6.37       
8 10/07/2008 9447.11        -508.39        -5.11       
9 10/19/1987 1738.74        -508.00        -22.61       
10 09/15/2008 10917.51        -504.48        -4.42       
11 09/17/2008 10609.66        -449.36        -4.06       
12 03/12/2001 10208.25        -436.37        -4.10       
13 02/27/2007 12216.24        -416.02        -3.29       
14 06/06/2008 12209.81        -394.64        -3.13       
15 07/19/2002 8019.26        -390.23        -4.64       
16 08/09/2007 13270.68        -387.18        -2.83       
17 09/20/2001 8376.21        -382.92        -4.37       
18 10/12/2000 10034.58        -379.21        -3.64       
19 03/07/2000 9796.03        -374.47        -3.68       
20 09/22/2008 11015.69        -372.75        -3.27       

Days with Greatest Percentage Loss

Rank Date Close Net Change % Change
1 10/19/1987 1738.74        -508.00        -22.61       
2 10/28/1929 260.64        -38.33        -12.82       
3 10/29/1929 230.07        -30.57        -11.73       
4 11/06/1929 232.13        -25.55        -9.92       
5 12/18/1899 58.27        -5.57        -8.72       
6 08/12/1932 63.11        -5.79        -8.40       
7 03/14/1907 76.23        -6.89        -8.29       
8 10/26/1987 1793.93        -156.83        -8.04       
9 10/15/2008 8577.91        -733.08        -7.87       
10 07/21/1933 88.71        -7.55        -7.84       
11 10/18/1937 125.73        -10.57        -7.75       
12 10/09/2008 8579.19        -678.91        -7.33       
13 02/01/1917 88.52        -6.91        -7.24       
14 10/27/1997 7161.15        -554.26        -7.18       
15 10/05/1932 66.07        -5.09        -7.15       
16 09/17/2001 8920.70        -684.81        -7.13       
17 09/24/1931 107.79        -8.20        -7.07       
18 07/20/1933 96.26        -7.32        -7.07       
19 09/29/2008 10365.45        -777.68        -6.98       
20 07/30/1914 71.42        -5.30        -6.91       

 

 

In percentage terms, here are the DJIA's 10 biggest annual gains:
The Dow's Best Years
Rank Year Close % Change
1
1915
99.15             
81.66             
2
1933
99.90             
66.69             
3
1928
300.00             
48.22             
4
1908
86.15             
46.64             
5
1954
404.39             
43.96             
6
1904
69.61             
41.74             
7
1935
144.13             
38.53             
8
1975
852.41             
38.32             
9
1905
96.20             
38.20             
10
1958
583.65             
33.96             

 

 

In percentage terms, here are the DJIA's 10 largest one-year declines:

The Dow's Worst Years

Rank Year Close % Change
1
1931
77.90             
-52.67             
2
1907
58.75             
-37.73             
3
1930
164.58             
-33.77             
4
1920
71.95             
-32.90             
5
1937
120.85             
-32.82             
6
1914
54.58             
-30.72             
7
1974
616.24             
-27.57             
8
1903
49.11             
-23.61             
9
1932
59.93             
-23.07             
10
1917
74.38             
-21.71             

 

 

Dow Jones Industrial Average Milestones
First Close Above Close Date First Close Above Close Date
1000 1003.16      11/14/1972 1100 1121.81      02/24/1983
1200 1209.46      04/26/1983 1300 1304.88      05/20/1985
1400 1403.44      11/16/1985 1500 1511.70      12/11/1985
1600 1600.69      02/06/1986 1700 1713.99      02/27/1986
1800 1804.24      03/20/1986 1900 1903.54      07/01/1986
 
2000 2002.25      01/08/1987 2100 2102.50      01/19/1987
2200 2201.49      02/05/1987 2300 2333.52      03/20/1987
2400 2405.54      04/06/1987 2500 2510.04      07/17/1987
2600 2635.84      08/10/1987 2700 2700.57      08/17/1987
2800 2810.15      01/02/1990 2900 2900.97      06/01/1990
 
3000 3004.46      04/17/1991 3100 3101.52      12/27/1991
3200 3201.48      01/03/1992 3300 3306.13      04/14/1992
3400 3413.21      06/01/1992 3500 3500.03      05/19/1993
3600 3604.86      08/18/1993 3700 3710.77      11/16/1993
3800 3803.88      01/06/1994 3900 3914.48      01/21/1994
 
4000 4003.33      02/23/1995 4100 4138.67      03/24/1995
4200 4201.61      04/04/1995 4300 4303.98      04/24/1995
4400 4404.62      05/10/1995 4500 4510.79      06/16/1995
4600 4615.23      07/05/1995 4700 4702.73      07/07/1995
4800 4801.80      09/14/1995 4900 4922.75      11/15/1995
 
5000 5023.55      11/21/1995 5100 5105.56      11/29/1995
5200 5216.47      12/13/1995 5300 5304.98      01/29/1996
5400 5405.06      02/01/1996 5500 5539.45      02/08/1996
5600 5600.15      02/12/1996 5700 5748.82      05/20/1996
5800 5838.52      09/13/1996 5900 5904.90      10/01/1996
 
6000 6010.00      10/14/1996 6100 6177.71      11/06/1996
6200 6206.04      11/07/1996 6300 6313.00      11/14/1996
6400 6430.02      11/20/1996 6500 6547.79      11/25/1996
6600 6600.66      01/07/1997 6700 6703.79      01/10/1997
6800 6833.10      01/17/1997 6900 6961.63      02/12/1997
 
7000 7022.44      02/13/1997 7100 7214.49      05/05/1997
7200 7214.49      05/05/1997 7300 7333.55      05/15/1997
7400 7435.78      06/06/1997 7500 7539.27      06/10/1997
7600 7711.47      06/12/1997 7700 7711.47      06/12/1997
7800 7895.81      07/03/1997 7900 7962.31      07/08/1997
 
8000 8038.88      07/16/1997 8100 8116.93      07/24/1997
8200 8254.89      07/30/1997 8300 8314.55      02/11/1998
8400 8451.06      02/18/1998 8500 8545.72      02/27/1998
8600 8643.12      03/10/1998 8700 8718.85      03/16/1998
8800 8803.05      03/19/1998 8900 8906.43      03/20/1998
 
9000 9033.23      04/06/1998 9100 9110.02      04/14/1998
9200 9211.84      05/13/1998 9300 9328.19      07/16/1998
9400 9544.97      01/06/1999 9500 9544.97      01/06/1999
9600 9643.32      01/08/1999 9700 9736.08      03/08/1999
9800 9897.44      03/11/1999 9900 9958.77      03/15/1999
 
10000 10006.78      03/29/1999 10100 10197.70      04/08/1999
10200 10339.51      04/12/1999 10300 10339.51      04/12/1999
10400 10411.66      04/14/1999 10500 10581.42      04/21/1999
10600 10727.18      04/22/1999 10700 10727.18      04/22/1999
10800 10831.71      04/27/1999 10900 11014.69      05/03/1999
 
11000 11014.69      05/03/1999 11100 11107.19      05/13/1999
11200 11200.98      07/12/1999 11300 11326.04      08/25/1999
11400 11405.76      12/23/1999 11500 11522.56      01/07/2000
11600 11722.98      01/14/2000 11700 11722.98      01/14/2000
11800 11850.61      10/04/2006 11900 11947.70      10/12/2006
 
12000 12011.73      10/19/2006 12100 12116.91      10/23/2006
12200 12218.01      11/14/2006 12300 12305.82      11/16/2006
12400 12416.76      12/14/2006 12500 12510.57      12/27/2006
12600 12621.77      01/24/2007 12700 12741.86      02/14/2007
12800 12803.84      04/18/2007 12900 12961.98      04/20/2007
 
13000 13089.89      04/25/2007 13100 13105.50      04/26/2007
13200 13211.88      05/02/2007 13300 13312.97      05/07/2007
13400 13487.53      05/16/2007 13500 13556.53      05/18/2007
13600 13633.08      05/30/2007 13700 13851.73      07/12/2007
13800 13851.73      07/12/2007 13900 13907.25      07/13/2007
 
14000 14000.41      07/19/2007 14100 14164.53      10/09/2007

 

The Dow Performance at the Onset of Major National Security Events 

 Dow Jones Industrial Average
EVENT DATE DAY % CHANGE FOR DAY** 6-MONTHS
LATER
1-YEAR LATER
 Operation Iraqi Freedom 03/19/03 Wednesday 0.26% 14.59% 23.24%
 America Strikes Back 10/07/01 Sunday -0.57% 12.63 -18.61
 Terrorist Attack 09/11/01 Tuesday -7.12% 10.47 -10.66
 Oklahoma Bombing 04/19/95 Wednesday 0.68% 14.92% 32.46%
 WTC Bombing 02/26/93 Friday 0.17% 8.41% 14.07%
 Somali Crisis 12/04/92 Friday 0.57% 7.80% 12.63%
 Operation Desert Storm 01/16/91 Wednesday 4.57% 18.73 30.14
 Kuwait Invasion* 08/02/90 Thursday -6.31% -5.81% 3.69%
 Panama & Noriega 12/15/89 Friday -1.53% 7.17% -5.32%
 Hostage in Grenada 10/25/83 Tuesday -0.69% -7.10% -3.31%
 Reagan Shot 03/30/81 Monday -0.26% -14.56% -17.12%
 Iran Crisis 11/04/79 Sunday -0.77% -0.32% 14.44%
 Watergate
   First Story Published 08/01/72 Tuesday 0.62% 6.60% -1.36%
   Congressional Investigation 02/07/73 Wednesday -1.15% -6.91% -15.43%
   Senior WH Aides Indicted 03/01/74 Friday -1.00% -21.14% -14.12%
   Articles of Impeachment
   Passed
07/27/74 Saturday -1.74% -10.02% 5.14%
   Nixon Resigns 08/08/74 Thursday -1.59% -10.74% 2.53%
 Vietnam Conflict 02/26/65 Friday -0.41% -0.81% 5.48%
 Tonkin Gulf Attack 08/04/64 Tuesday -0.90% 7.58% 5.18%
 Kennedy Assassination 11/22/63 Friday -2.89% 12.04% 21.58%
 Cuban Missile Crisis 10/22/62 Monday -1.85% 25.05% 31.41%
 Sputnik Launched 10/04/57 Friday -2.01% -4.59% 15.60%
 Korean War 06/25/50 Sunday -4.65% 2.36% 9.34%
 Pearl Harbor 12/07/41 Sunday -3.50% -9.48% -1.37%
 Lusitania Sinks 05/07/15 Friday -4.54% 36.01% 32.75%
 USS Maine Explodes 02/15/1898 Tuesday -2.14% 14.91% 24.90%
 *The 6.31% drop is over 3 trading days: 1.2% on the day of the invasion, and followed by a decline of 1.92% on Friday and 3.32% on Monday.
 **If the event occurred after the U.S. market closed or on a non-trading day, the % change for day reflects the next trading day's activity.

 

sources and other references

http://www.mercurynews.com/nationworld/ci_10713766
http://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average
http://en.wikipedia.org/wiki/Closing_milestones_of_the_Dow_Jones_Industrial_Average
http://en.wikipedia.org/wiki/List_of_largest_daily_changes_in_the_Dow_Jones_Industrial_Average

 

 

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