On 3 July 1884, the world's first stock index, the Dow Jones Transportation Index, was published by Charles Dow.
The index was made up of 11 transportation stocks, including nine railway companies. The average was calculated by adding the price of all the shares, and dividing them by the number of stocks.
The index now contains 20 stocks, including rail companies, road haulage companies, delivery companies and marine and air transport companies. The only remaining stock from the original 11 is the Union Pacific Corporation.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Dow was a newspaper man, who, with Edward Jones and the largely forgotten Charles Bergstresser, founded Dow Jones & Company in 1882. The company's first publication was the Customer's Afternoon Letter, which contained financial news and share prices.
By 1889, the Letter had become the Wall Street Journal, containing four pages and selling for two cents.
Dow launched a further index, the Dow Jones Industrial Average, in 1895. This index is widely known as the Dow'.
After Dow's death in 1902, Dow Jones was acquired by financial publisher Clarence Barron. After over a century under the control of Barron's, it was taken over by News Corporation in 2007.
The index, along with many others including the S&P 500 and the Dow', is now produced by S&P Dow Jones Indices, a joint venture between McGraw Hill Financial, the CME Group and News Corporation.
The Transportation Index is critical to Dow Theory', which states that "industrials make and transports take". The theory is that a bull or bear market trend will have staying power if both the Industrial and Transportation indices are moving in tandem.
If the two diverge, there could be trouble. For example, if the industrial index is rising, but the transportation index is falling , the theory is that industry is producing too many goods for consumer demand, a bad sign for the economy in general.
-
Starmer says Britain cannot ignore Russia threat – should you invest in defence?Defence stocks have been enjoying a winning streak since March. As Keir Starmer unveils Britain’s defence spending plan for the next decade, is it time to invest in defence?
-
How to manage a windfall: what to do with a £10,000 lump sumThe FCA has warned wealthy savers they have too much in cash, but beneficiaries of windfalls are still hugging safe havens and losing out
-
Quiz of the week 21-27 NovemberFeatures Test your recollection of the events of the last seven days with MoneyWeek's quiz of the week.
-
A. Gary Shilling: a recession is comingFeatures A. Gary Shilling was among the few investors to correctly predict a lengthy stagnation in the wake of the financial crisis. Now he's warning of a recession.
-
The world’s greatest investors: Bill NygrenFeatures Nygren is a value investor who looks for companies that he thinks are trading below what he considers to be their intrinsic value.
-
Buffett’s bet: can a tracker trounce the hedgies?Features There’s no sense in handing 1%-2% plus fees to fund managers when a cheap tracker gets results, says Stephen Connolly.
-
How will falling US consumer spending affect gold?Features Paul van Eeden examines past and current trends to suggest what the fallout from the US housing slump and reduced consumer spending will be, especially for gold and other base metals.
