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May 26, 2020, 1:25 p.m. EDT

The Dow has surged over 61,000% as it marks its 124th year — Here’s a brief history of the most popular stock-market barometer amid the coronavirus crisis

The index was created on May 26, 1896 by Charles Dow

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By Mark DeCambre, MarketWatch

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Happy birthday, DJIA!

It is the 124th anniversary of the U.S.’s oldest stock-market exchange.

And what a way to usher in a century and a quarter of existence, with the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.34% surging on Tuesday, pushing toward its highest trading level since early March — a month that marked the end to an 11-year bull run for U.S. equity indexes amid the fallout of the coronavirus pandemic, the worst public-health crisis since the 1918 influenza.

On May 26, 1896, Charles Dow, one of the founders of The Wall Street Journal, introduced a way to quickly read the performance of the market. Since that point, the Dow has become one of the most widely tracked stock gauges in the U.S., if not the world. The stock-market barometer has changed significantly since inception.

Check out : Stock-market bulls cheer as S&P 500 trades above 200-day moving average — what comes next?

It was originally composed of 12 industrial stocks: Chicago & North Western, Delaware, Lackawanna & Western, Lake Shore, Louisville & Nashville, Missouri Pacific, New York Central, Northern Pacific, Pacific Mail, St. Paul, Union Pacific /zigman2/quotes/209717171/composite UNP +1.27%  and Western Union /zigman2/quotes/206269665/composite WU +0.19% .

Here’s a look at some of the component s over the years.

Back in the late 1800s, the index was determined by simply adding the share prices of the 12 industrial components and dividing by 12 to arrive at an average price for the stock-market barometer.

Of course, since then the blue-chip index has broadened to 30 constituents in various industries starting in 1928, with a so-called divisor introduced that same year to help calculate the price-weighted Dow’s overall reading. Thus far, the index has soared more than 61,000%, according to Dow Jones Market Data.

John Steele Gordon, the author of “An Empire of Wealth: The Epic History of American Economic Power,” writing in the Wall Street Journal back in 2012 wrote that a look at the Dow’s evolution over more than a century underscores the changes in the U.S. economy, including the digitization of American business, the rise of big banks like JPMorgan Chase & Co. /zigman2/quotes/205971034/composite JPM +0.87% and Goldman Sachs /zigman2/quotes/209237603/composite GS -0.08% , the constant transformations of the retail industry and ebbing dominance of the energy sector.

The Dow has always been a unique measure of the stock market’s performance, differing notably from its market-capitalization based peers like the S&P 500 /zigman2/quotes/210599714/realtime SPX +1.60% and the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +2.26% .

Its components are handpicked by a committee that doesn’t use a rule-based method but instead look at the reputation, growth and prominence of possible components.

In that way, the Dow itself is arguably an actively managed index, and may be the best case for active management in a world in which passively traded, index-tracking exchange-traded products have dominated the investing scene on Wall Street.

The committee’s methodology also states that companies must be in the S&P 500 index to be considered for inclusion.

Presently, the U.S. economy is in the throes of one of the most severe economic downturns since the Great Depression of the 1930s, with forced lockdown procedures to limit the spread of the COVID-19 pandemic likely thrusting the economy into a recession.

Financial markets are now attempting to claw their way back from the depths of that crisis, but the Dow has lagged behind its rival benchmarks. So far this year, the Dow is off 12.3%, the S&P 500 index has lost more than 7% and the Nasdaq has gained 4.8% over the same period.

Ken Jimenez contributed to this article

US : Dow Jones Global
+358.52 +1.34%
Volume: 391.73M
Sept. 25, 2020 5:06p
$ 198.15
+2.48 +1.27%
Volume: 1.71M
Sept. 25, 2020 4:00p
P/E Ratio
Dividend Yield
Market Cap
$134.51 billion
Rev. per Employee
$ 21.57
+0.04 +0.19%
Volume: 2.21M
Sept. 25, 2020 4:03p
P/E Ratio
Dividend Yield
Market Cap
$8.87 billion
Rev. per Employee
$ 93.47
+0.81 +0.87%
Volume: 13.29M
Sept. 25, 2020 4:00p
P/E Ratio
Dividend Yield
Market Cap
$284.86 billion
Rev. per Employee
$ 194.95
-0.16 -0.08%
Volume: 3.11M
Sept. 25, 2020 4:00p
P/E Ratio
Dividend Yield
Market Cap
$67.08 billion
Rev. per Employee
+51.87 +1.60%
Volume: 2.18B
Sept. 25, 2020 5:06p
US : U.S.: Nasdaq
+241.30 +2.26%
Volume: 3.38M
Sept. 25, 2020 5:16p

Mark DeCambre is MarketWatch's markets editor. He is based in New York. Follow him on Twitter @mdecambre.

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