100 years of hard living

The Dow Jones celebrates its centenary today. Paul Farrelly charts a dramatic history
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The Independent Online
Today, as the US settles in for its long Memorial Day weekend, as Gordon Gekko types lie unbraced in their Long Island mansions, a milestone in Wall Street history quietly passes.

Without so much as a trader's cry or dawn raid mounted, the Dow Jones Industrial Average, the world's most famous stock market index, is 100 years old.

It is a landmark that recalls dazzling climbs and spectacular crashes. Created by Charles Dow and Edward Jones, two New York journalists, it first appeared on 26 May 1896, when the Klondike gold rush was at its peak, the little remembered Grover Cleveland was president and the Conservative Marquess of Salisbury was the last peer proper to be British prime minister.

The Dow has seen off the 1929 Wall Street crash, when $30bn was wiped off share prices, and 1987's Black Monday which sent shares spinning from London to Tokyo in the worst slump since.

"It's the oldest and best-known index. No matter how many indices are created - and we've got all kinds now - it's the one that's written into every stock market lead," said New York broker William LeFevre.

At first, the Dow Jones Average took in 12 "smoke stack" companies. Only General Electric survives among the 30- strong group that makes up the Dow today. The number was expanded as the economy grew, and its constituents - the likes of McDonald's, Coca-Cola, Walt Disney and General Motors - still provide an enduring snapshot of US household names, accounting for as much as 10 per cent of the country's gross domestic product.

Mr LeFevre, known on Wall Street as the keeper of the Dow, has seen a few changes. "I started on Wall Street in June 1949, Harry S Truman was president, the Dow was at 160 and it was the hottest summer in history," he said last week.

Last Wednesday the Dow had its own early celebration, closing at a record 5,778. Then it wobbled on the resignation of Jeffrey Vinik, head of America's largest investment fund, Magellan - a testament to the enduring ability of powerful individuals to rock the US market.

Charles Dow was born on a Connecticut farm in 1951 and started in journalism at 21 with the Springfield Daily Republican, before meeting Edward Jones at the grandly titled Providence Morning Star and Evening Press in Rhode Island.

In 1882, after shuttling around New York delivering handwritten news to banks and brokers, they formed Dow Jones & Co and employed messengers to do the shuttling instead.

Now Dow Jones is an electronic information giant that stands second only to Reuters of the UK in the news agency world. Its flagship publication, the Wall Street Journal - started in 1889 from a two-page financial bulletin - sells 1.8 million copies a day in US, European and Asian editions.

The Average itself came 39 years before the Financial Times 30 index and 53 years before the Nikkei 225 in Tokyo.

Share selection is now done by the Wall Street Journal's editors: "The stocks are chosen as representative of the broad market and of American industry," said managing editor Paul E Steiger. "The companies are major factors in their industries and their stock is widely held by individuals and institutional investors."

Changes are rare, leading to criticism that the Average lags behind in the high-technology world. The last came in May 1991, when Walt Disney replaced USX, the old US Steel. Microsoft has yet to make it.

Movements are tracked second by second by computers and transmitted instantaneously around international markets, a world away from Charles Dow's daily addition and division with pencil and paper.

Mr LeFevre remembers trading being much the same in the 1950s and 1960s, before the dramatic changes wrought by new technology: "There were no computers. I used a No.2 pencil and paper and we had a lot of runners. It's such a difference."