The DJIA was created to measure the movements of the leading companies in the United States engaged in industrial activities. It uses the price-weighted index, meaning that stocks with a higher share price carry a greater weight in the index than stocks with a low share price.

What is the difference between Dow and S&P 500?

The DJIA tracks the stock prices of 30 of the biggest American companies. The S&P 500 tracks 500 large-cap American stocks. Both offer a big-picture view of the state of the stock markets in general.

What is the Dow industrial average and why do we care?

The Dow Jones Industrial Average (DJIA) was created to serve as a stock market and economic indicator. Charles Dow’s first version of the DJIA appeared in the Wall Street Journal in 1896, containing 12 stocks. The DJIA expanded to 30 stocks in 1929, which is the number of stocks it still maintains today.

What makes up the Dow?

Started in 1896, the DJIA is comprised of blue-chip stocks, approximately two-thirds of which are represented by companies producing industrial and consumer goods. The rest are chosen from all the major sectors of the economy including information technology, entertainment, and financial services.

What are stock market crashes and why are they bad for an economy?

Stock market crashes wipe out equity-investment values and are most harmful to those who rely on investment returns for retirement. Although the collapse of equity prices can occur over a day or a year, crashes are often followed by a recession or depression.

What does the S and P stand for?

S&P 500, abbreviation of Standard and Poor’s 500, in the United States, a stock market index that tracks 500 publicly traded domestic companies. Standard & Poor’s, which sponsors a number of other market indexes, traces its roots to an investment information service begun in 1860 by Henry Varnum Poor.