This Day In Market History: Charles Dow Launches Dow Jones Industrial Average

Each day, Benzinga takes a look back at a notable market-related moment that occurred on this date.

What Happened? On this day in 1896, Charles Dow launched the Dow Jones Industrial Average.

Where The Market Was: The Dow launched at a price of 40.94, and it predated the creation of the S&P 500.

What Else Was Going On In The World? In 1896, Utah became the 45th U.S. state. The U.S. Supreme Court upheld the constitutionality of racial segregation under the doctrine of “separate but equal” in Plessy v. Ferguson. Five pounds of flour cost about 12 cents.

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Dow Launches: Charles Dow first began publishing a stock average calculated from nine railroad stocks and two industrial stocks in 1884. The average was published in the “Customer’s Afternoon Letter,” a precursor to the Wall Street Journal.

However, Dow first calculated his Dow Jones Industrial Average in May 1896. The original index consisted of 12 industrial stocks: American Cotton Oil, American Sugar, American Tobacco, Chicago Gas, Distilling & Cattle Feeding, General Electric Company GE, Laclede Gas, National Lead, North American, Tennessee Coal and Iron, U.S. Leather, and U.S. Rubber.

The index was originally calculated as a simple arithmetic average by adding up the share prices of all 12 components and then dividing by 12.

Most of the original 12 Dow components have been delisted, acquired, broken up or morphed into completely different businesses and companies throughout the years. General Electric became the last original member to leave the Dow Jones Industrial Average in 2018.

A person who hypothetically invested $100 in a Dow Jones Industrial Average index fund in May 1896 and reinvested dividends along the way would now be sitting on an 18,738,351% gain.

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