Who or What Is Dow Jones?

Dow Jones, or more precisely, Dow Jones & Company, is one of the world’s largest business and financial news companies. In daily usage, Dow Jones can also refer to the famous Dow Jones Industrial Average, one of many market benchmarks that the company launched to track the stock market’s overall performance.

Charles Dow, Edward Jones, and Charles Bergstresser formed the company in the 19th century. Today, Dow Jones & Co. still runs The Wall Street Journal and other financial publications, but the indexes have been sold to S&P Dow Jones Indices LLC.

Key Takeaways

• Dow Jones & Company is one of the largest business and financial news companies in the world.
• Dow Jones & Company was founded in 1882 by Charles Dow, Edward Jones, and Charles Bergstresser.
• Dow Jones started the Dow Jones Industrial Average (DJIA), as well as many other indexes.
• The DJIA tracks publicly owned corporations and is one of the most-watched stock indexes in the world.
• Dow Jones sold the DJIA and its other indexes to S&P Dow Jones Indices LLC, a joint venture between S&P Global and the CME Group.

Who Is Dow Jones?

Dow Jones was not a single person, but two of the three people who founded Dow Jones & Company in 1882. The last names of Charles Dow and Edward Jones came to form the company name, with Charles Bergstresser as the company’s third founder. In 1889, they formed The Wall Street Journal, still one of the world’s most influential financial publications.

Dow was known for explaining complicated financial news to the public. He believed investors needed a simple benchmark to indicate whether the stock market was rising or declining. Dow chose several industrial-based stocks for the first index, and the first reported average was 40.94.

Charles Dow also believed it was possible to predict stock market movements based on the price movements of different types of stocks. According to Dow Theory, an upward trend in industrial stocks should be confirmed by a similar move up in transportation stocks. Charles Dow created various market averages to better anticipate the direction of industrial and transportation stocks.

What Is Dow Jones?

Charles Dow and Edward Jones ran Dow Jones & Company until Dow’s death in 1902, after which Clarence Barron and Jessie Waldron bought the company. Eventually control passed to the Bancroft family. In 2007, News Corp. purchased Dow Jones & Company from the Bancrofts.

Dow Jones & Company continues to be a major source of financial news. Its publications included MarketWatch, Barron’s, and, of course, The Wall Street Journal. These financial news outlets have maintained considerable independence from News Corp.

Meanwhile, Dow Jones & Company no longer directly controls the Dow Jones Averages that it originally created. The Dow Jones Averages are owned by S&P Dow Jones Indices LLC, a joint venture between S&P Global and the CME Group.

The Dow Jones Industrial Average (DJIA)

It’s easy to confuse Dow Jones with the Dow Jones Industrial Average (DJIA). Often referred to as “the Dow,” the DJIA is one of the most-watched stock indexes in the world; it includes companies like Apple Inc. (AAPL), Boeing Company (BA), Microsoft Corporation (MSFT), and Coca-Cola Co. (KO).

The DJIA initially launched with just 12 companies across sectors like railroads, cotton, gas, sugar, tobacco, and oil. Later, it grew to include 30 firms, which is the number it comprises today. Although the economy’s health is now tied to many other sectors, the DJIA is still seen as a vital indicator of the U.S. economy’s well-being.

Important

Although the Dow Jones Industrial Average rarely changes, there are occasional additions and deletions. These changes often come in batches and always keep total membership at 30 companies.

Dow Jones & Company owned the DJIA as well as many other indexes that represent different sectors of the economy. They included the oldest index, the Dow Jones Transportation Average, which tracks 20 transportation companies, such as airlines and delivery services. Another major index is the Dow Jones Utility Average, which tracks 15 U.S. utility stocks.

In 2012, S&P Dow Jones Indices LLC bought the Dow Jones Indexes. S&P Dow Jones Indices LLC is a joint venture between controlling member S&P Global and the CME Group.

In recent years, the S&P 500 Index is likely the more popular of the two indexes, though the DJIA remains the best-known among the general public. Another essential index for investors to know is the Nasdaq Composite Index, which includes more than 2,500 U.S. and international equities trading on the tech-heavy Nasdaq stock exchange.

Explain Like I’m Five

Dow Jones is the company that publishes The Wall Street Journal, Barron’s, MarketWatch, and several other business publications and newswires. It was named after two of its founders, Charles Dow and Edward Jones.

The Dow Jones can also mean the Dow Jones Industrial Average, the average stock price of 30 top U.S. companies. Investors use the Dow average as a convenient yardstick for overall stock market performance. Although it was originally launched by Dow Jones & Co., it is now owned by another company.

What Exactly Is the Dow Jones?

The Dow Jones Industrial Average groups together the prices of 30 of the most traded stocks on the New York Stock Exchange (NYSE) and the Nasdaq. It’s an index that helps investors determine the overall direction of stock prices.

How Is the DJIA Calculated Differently From Other Indexes?

Unlike most major stock indexes weighted by market capitalization, the DJIA is price-weighted, meaning stocks with higher share prices have a greater impact on the index’s movement regardless of the company’s total market value. For example, a $100 stock will have five times more influence on the DJIA than a $20 stock, even if the $20 stock’s company is actually larger in total market value.

Can You Buy Shares in the Dow Jones Industrial Average?

You can buy shares in the Dow through exchange-traded funds. However, you can’t invest directly in the Dow Jones Industrial Average because it is just an index.

How Does a Company Join the DJIA?

To be included, a company must be part of the S&P 500 Index, have an excellent reputation, show sustained growth, be of interest to most investors, and be incorporated in the U.S. However, there’s no strict formula—the selection committee has significant discretion and considers factors like industry representation and how a company reflects the U.S. economy. They typically favor companies with higher stock prices because of the index’s price-weighted nature.

The Bottom Line

Dow Jones & Company, founded by Charles Dow and Edward Jones, began as a financial news company and created the influential DJIA. While the company continues to operate significant financial news outlets like The Wall Street Journal under News Corp’s ownership, the famous DJIA and other indexes are now owned by S&P Dow Jones Indices LLC.