Dow Jones Industrial Average®
The Dow Jones Industrial Average (The Dow®) made its debut on May 26, 1896. It was the brainchild of Charles Dow, the tall, bearded, and unassuming journalist who cofounded Dow Jones & Co., publisher of The Wall Street Journal. (Dow’s partner, Edward Jones, also has his name attached to the average, but he had nothing to do with its creation.)
The Dow was initially made up of 12 stocks (versus 30 today), including a leather maker, a steel provider, and a sugar producer. It was calculated by adding up the prices of the component stocks and dividing the sum by a divisor.
The Dow Jones Industrial Average wasn’t Mr. Dow’s first foray into measuring the market. In 1884, he produced an average of 11 stocks, mainly railroad companies. This market indicator was intermittently published in the “Customer’s Afternoon Letter,” a precursor to The Wall Street Journal.
The Standard “500” was introduced at a luncheon for the press on February 27, 1957, at the Lawyers Club in New York, with a turnout of 35 top financial writers. Between the main dish and coffee, Lew Schellbach—a Standard & Poor’s editor, PR director, and economist considered the “Father of the S&P 500”—described the new index and improvements reflected in the expanded market indicator.
It had been more than 30 years since S&P created its first market indicator—a 90-stock measure that included 50 industrial companies. Based at 100, it didn’t claim to be an average, but rather an “index” that would allow investors to more-easily gauge market performance relative to previous levels.
But it wasn’t until 1957 that the Standard “500,” as it was then known, emerged. Its introduction was enabled by an electronic calculation method developed by Boston-based Melpar, Inc., that allowed S&P to perform index calculations much more efficiently than before.