The Ottumwa Courier

AP National

September 10, 2013

Why the Dow is getting a makeover

NEW YORK (AP) — The barometer of America's stock market — the Dow Jones industrial average — is getting a makeover.

Alcoa, Bank of America, and Hewlett-Packard are being dropped from the index of America's 30 top companies and replaced by Goldman Sachs, Nike, and Visa.

It's the index's biggest change in almost a decade. Dow will make the switches, which take effect Sept. 23, because of the falling stock prices of the removed companies and a need to more accurately represent the economy.

Here is how the Dow works and what the changes mean.

Q: WHAT IS THE DOW?

A: The Dow Jones industrial average is the most popular gauge of the health of the stock market and U.S. economy. It was created in 1896 by Charles H. Dow, one of the founders of The Wall Street Journal, with the intention of giving the stock market credibility and making investing more understandable. The original index had 12 members. The number of companies making up the Dow gradually increased to 30 in 1928.

The index is calculated and published by S&P Dow Jones Indices, a joint venture owned by McGraw-Hill, CME Group and Dow Jones. A small committee decides which companies are added to or dropped from the Dow.

Q: WHO GETS IN THE DOW?

A: It's an elite club. The Dow's members are often referred to as "blue chip" stocks," and entry into the index is reserved for a company that "has an excellent reputation, demonstrates sustained growth and is of interest to a large number of investors."

Because the Dow has only 30 members, compared with the 500 members of the Standard & Poor's 500 index, entry is limited. The committee that decides who joins the Dow tries to pick companies that best represent the makeup of the economy.

Text Only
AP National
  • US economy, though sluggish, may now be sturdier WASHINGTON (AP) — Out of a seemingly hollow recovery from the Great Recession, a more durable if still slow-growing U.S. economy has emerged. That conclusion, one held by a growing number of economists, might surprise many people. After all, in the f

    July 23, 2014

  • Judges in health care rulings vote party line WASHINGTON (AP) — In rapid succession, six federal judges on two appeals courts weighed in on a key component of President Barack Obama's health care law. Their votes lined up precisely with the party of the president who appointed them. It was the l

    July 23, 2014

  • House, Senate chart separate courses on border WASHINGTON (AP) — Senate Democrats and House Republicans are moving separately to slash President Barack Obama's $3.7 billion emergency spending request for the southern border, but they're unlikely to end up with a deal that could pass both chambers

    July 23, 2014

  • 10 Things to Know for Today Your daily look at late-breaking news, upcoming events and the stories that will be talked about today: 1. THE FINAL DAYS AND HOURS OF FLIGHT 17'S PASSENGERS The Boeing 777 traveling from Amsterdam to Malaysia held the promise of beginnings and endin

    July 23, 2014

  • Agents get subsidized 'Obamacare' using fake IDs WASHINGTON (AP) — Congress will hear testimony Wednesday detailing how undercover investigators used fake identities to get taxpayer-subsidized health insurance under President Barack Obama's law. The nonpartisan Government Accountability Office says

    July 23, 2014

  • Police custody death tests 'Broken Windows' tactic NEW YORK (AP) — Eric Garner, who died in police custody last week after he was put in an apparent chokehold, was suspected of committing the relatively minor crime of selling loose, untaxed cigarettes on the street. The encounter was an unintended co

    July 23, 2014

  • Obama urges immediate access to Ukraine crash site WASHINGTON (AP) — President Barack Obama sternly called on Russian President Vladimir Putin to compel Kremlin-backed separatists to stop hampering the probe at the Ukraine site of a downed passenger jet and allow international investigators unfettere

    July 22, 2014

  • American Jews, other 'lone soldiers' serve Israel JERUSALEM (AP) — The two Americans killed in fighting in the Gaza Strip followed in the footsteps of scores of Jews from around the world who have volunteered to fight for Israel. Israel calls them the lone soldiers: They are men and women in the pri

    July 22, 2014

  • 2008 law unexpectedly at center of border debate WASHINGTON (AP) — A 2008 law to address human trafficking is at the center of the debate over the immigration crisis at the nation's Southern border. The law was passed at a time when fewer than 10,000 unaccompanied minors showed up each year at the

    July 22, 2014

  • Lawmakers face long to-do list, uncertain success WASHINGTON (AP) — A gridlocked Congress failed to do the big things: overhauling the nation's immigration system, reforming the loophole-cluttered tax code and stiffening background checks on gun buyers. Now it's time to see whether it can just do th

    July 22, 2014

Obituaries
Record
Facebook
AP National