The intelligent and ultra-conservative journalist heralded for his scientific approach to the markets, Charles Henry Dow, first published his average of industrial stocks this week on May 26, 1896.

Dow, along with his partner Edward Jones, began publishing the first average -- the transports -- comprised of nine railroads, a steamship line and the Western Union Telegraph Company for issues of their two-page Customer’s Afternoon Letter (later renamed the Wall Street Journal) in 1884. This average was an attempt to analyze prices and serve as a “stock market barometer” of what Dow felt were the market movements of financially “respectable” heavy hitters.

Two years later, the Dow Jones Industrial Average (DJIA) was introduced to better reflect American industries. Its 12 components: American Cotton Oil, American Sugar, American Tobacco, Chicago Gas, Distilling and Cattle Feeding, General Electric, Laclede Gas Light, National Lead, North American, Tennessee Coal, Iron & Railroad, U.S. Leather Preferred, and U.S. Rubber. The first average computed from this list was 40.94 ... though true to stock lore’s “sell in May, go away,” the DJIA gradually sold off to "achieve" its record low of 28.48 on August 8, 1896.

By 1916, the DJIA consisted of 20 stocks -- and reached its current number, 30, by 1928. Many years later, the 1967 Broadway musical comedy "How Now, Dow Jones" hit the stage with a plot recounting a young man’s refusal to marry his fiancée until the DJIA crossed 1000. The show is a forgettable flop, but Dorothy Parker’s acerbic review “Standard and Poor” endures ... much like the DJIA itself.

This Week in Wall Street History

5/26/08