Stock Market Info

Many worried investors have been tracking the daily route of the Dow Jones industrial standard like never before. But few only understand how the index of 30 of the biggest U.S companies is calculated. The 30 members of the index are: 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.

Some have been wondering as to what the Dow Jones industrial standard was. It is just simply the oldest continuing U.S market index and it measures the combined stock values of 30 big U.S companies. At these times, the index has extended to reflect the U.S economy’s move away from big industrial companies.

The way it usually calculates is by taking the price of one share of each company’s stock, added the numbers up and divided by the number of companies. Today, Dow Jones & Co. has come up with a mathematical formula to adjust for things like stock splits. The idea is to keep the index reliable over time, and to make sure today’s value can be compared in meaningful way to what it was even 10 years ago.

When the index is “price-weighted average”, it means expensive stocks have more influence over the number than the lower-priced ones do. For an example, a sharp drop in the price Federal Motors last week didn’t have a huge effect on the Dow because the automaker’s stock was already low. The stock fell $2.15, or 31%, on Thursday but only lowered the Dow by 17.1 points. GM’s drag wasn’t all that noticeable on day when the Dow plunged 679 points.

The Dow is both considered a good and bad measure of how the nation’s companies are generally faring in the stock market. 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 normally believe it is a useful tool when combined with other market indicators, including the S&P 500 and the NASDAQ composite, an index of shares on the tech-heavy NASDAQ stock market.