An index of 30 blue-chip US stocks, the DJIA at more than 100 years old is the oldest ongoing US market index and the most watched number in the world.

From time to time, old stocks are rotated out of the DJIA and new ones are put in to "better represent" the current economic situation. In the latest such change (late 1999), Microsoft and Intel were two of the four stocks placed in this very watched index.

more information is available here: http://indexes.dowjones.com/faqs.html

Some market watcher's superstitions are more bull than bear when it comes to predicting the market. When it comes to predicting the ups and downs:

  • Some believe the market rises when skirt lengths become shorter and down when hemlines drop. For example, the market rose during the 1920s, when the flappers shocked the nation by shortening their skirts. Yet during the Great Depression on the 1930s hemlines went down; along with the market.
  • Have you heard the phrase Once in a blue moon? Some people contend that the market goes up with a blue moon, which is the second full moon in a calender month. But it will be a while before the market is moonstruck again because the next blue moon won't arrive until July 2004.
  • The sayings go: Wide ties, prepare for a bear. Narrow ties, brace for a bull. That's what some people were saying; throughout most of the 1980s and 1990s, when most bull were running, ties were conventionally slim.
  • The Super bowl forecasts the direction of the market. Under this theory, the stock market will finish the year on an up note when a team from the original National Football League wins the Vince Lombari trophy. When a team from the old American Football League in the winner, the year will end with the stock prices down.
  • Then there's Big Blue, IBM. Seventy percent of Fortune 1000 corporate logos are blue too! Even new brands like Bluefly, Blue Martini and JetBlue are sporting the color blue, why? It's symbolizes consistency and dependability says a member of Pantone Color Institute, "The sky has never fallen and water has never gone away."

With all of the associated news of the tragedy of September 11, 2001 market volatility for the US Stock Market has ensued as it has in past crisis like that of Pearl Harbor, the Kennedy assassination and the market crash of 1987. The DOW dropped immediately after each event and regained strength some months later. The actions of monetary and fiscal policy makers usually in time demonstrate a result in a marked improvement in the US economy. This drives corporate earnings and in turns drives the stock prices. The following information is a snapshot of how the DOW reacted within a short period of time after an event and then takes a look at the market six months later.



                                                     Percent
                   Reaction Period     Percent       change
                                       change in   after six
                                       the DJIA      months

                                         




Fall of France   May 9-                -17.1%         7.0%
                 June 22, 1940   


Pearl Harbor    Dec. 6-                 -6.5%        -9.6%
                Dec 10,1941    

Cuban missile crisis  Oct. 19-          -1.1%        24.2%
                       Oct.27,1962 

JFK assassination  Nov. 21-              -2.9%        15.1%
                  Nov 22, 1963 

1973 oil embargo    Oct.18-            -17.9%         7.2%
                    Dec 5, 1973   

Nixon resigns     Aug. 9-              -15.5%        12.5%
                  Aug. 29, 1974    

US invades Grenada  Oct. 24,1983-       -2.7%        -3.2%
                    Nov. 7,1983       

Market crash of 1987  Oct. 2-          -34.2%        15.0%
                      Oct. 9, 1987  

Gulf war ultimatum   Dec. 24, 1990-     -4.3%        18.7%
                     Jan. 16, 1991

World Trade Center bombing  Feb. 26-    -0.5%         8.5%
                            Feb. 27, 1993

Oklahoma City bombing  April 19-         0.6%        12.9%
                       April 20, 1995  
Sept.11 Terrorist Attack  Sept.10-     -14.3%        28.8%
                          Sept. 21,2001  
                                   

It's still too early to make any predictions about when the economy will improve. But it's safe to say that there is reason to be optimistic about America's long term financial future.

Update: June 5,2002. As of March 11, 2002--six months after the terrorist attack, the Dow Jones was up 28.8 percent, S&P 500 up 32 percent and NASDAQ was up 35.6 percent. All registered positive returns.

    "The moral is to stick with your long term investment plan even during periods of market volatility," says investor Andy Hedrick. "Make sure your portfolio matches your risk tolerance and time horizon, and then let your plan work for you."

Source: Ned Davis Research

You hear it everday , the Dow is up, the Dow is down. How is it computed one might ask. First a little history lesson.

The Dow Jones Industrial Average started out in 1896 with 12 stocks. For any trivia buffs out there, they were:

American Cotton Oil
American Sugar
American Tobacco
Chicago Gas
Distilling and Cattle Feeding
General Electric - the sole surviving company btw
Laclede Gas
National Lead
North American
Tennessee Coal and Iron
U.S. Leather
U.S. Rubber

The number of stocks increased to 20 in 1916. It jumped up to 30 in 1928 and has remained at that number ever since.

For those of you who care, the companies that currently make up the Dow are:

Alcoa
American Express
Boeing
Caterpillar
CitiGroup
Disney
Du Pont
Eastman Kodak
General Electric
General Motors
Hewlett Packard
Home Depot
Honeywell
Intel
IBM
International Paper
Johnson & Johnson
JP Morgan Bank
Coca Cola
McDonalds
Microsoft
Minnesota Mining & Manufacturing (3M)
Philip Morris
Merck
Proctor & Gamble
SBC Communications
AT & T
United Technologies
WalMart Stores
Exxon Mobil

Anyway, the average is computed by summing the prices of the stock and then dividing the total by a constant (the divisor). The divisor for the DJIA is adjusted periodically to reflect splits in the stocks that make up the average. The divisor was originally 30 but has been reduced over the years to a value of less than one. The current divisor is about 0.20. If you really need it, the precise value of the divisor is published in the Wall Street Journal and Barron's.

It's actually not as complicated as some of the rest of the Wall Street mumbo jumbo that you hear everyday.

The Dow Jones Industrial Average first appeared in the The Wall Street Journal on May 26, 1896. Before that, the Dow Jones Average which consisted of 9 railroads and 2 industrial stocks.

The Dow Jones average was created as a component of the Dow Theory. It was intened to be the signaling mechanisim to inform investors that the market was about to turn.

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