Charles Henry Dow and the Dow Jones Index
Charles Henry Dow
B. November 6, 1851
D. December 4, 1902
Was an American journalist, born in Sterling, Connecticut, USA
Co-founded Dow Jones & company with Edward Jones and Charles Bergstresser.
And co-founded The Wall Street Journal, which has become one of the most respected financial publications in the world.
He also invented the Dow Jones Industrial Average as part of his research into market movements. He developed a series of principles for understanding and analyzing market behavior which later became known as Dow theory, the groundwork for technical analysis.
Dow did not have much education or training, but he managed to find work at the age of 21 with the Springfield Daily Republican, in Massachusetts. He worked there from 1872 until 1875 as a city reporter. Dow then moved on to Rhode Island and joined the Providence Star, where he worked for two years as a night editor. In 1877, Dow joined the staff of the prominent Providence Journal.
Dow specialized in articles on regional history.
In 1879, Dow and various tycoons, geologists, lawmakers and investors embarked on a four-day train trip to Colorado. Dow learned a great deal about the world of money on that journey: he interviewed many highly successful financiers and heard what sort of information the investors on Wall Street needed to make money. The businessmen seemed to like and trust Dow, knowing that he would quote them accurately and keep a confidence.
In 1880, Dow left Providence for New York City, to work at the Kiernan Wall Street Financial News Bureau, which delivered by messenger hand written financial news to banks and brokerages. When the Editor asked Dow to find another reporter for the Bureau, Dow invited Edward Davis Jones to work with him. Jones and Dow had met when they worked together at the Providence Evening Press. Jones, a Brown University dropout, could skillfully and quickly analyze a financial report. He, like Dow, was committed to reporting on Wall Street without bias. Other reporters could be bribed into reporting favorably on a company to drive up stock prices. Dow and Jones refused to manipulate the stock market.
The two young men believed that Wall Street needed another financial news bureau. In November 1882, they started their own agency, Dow, Jones & Company. In November 1883, the company started putting out an afternoon two-page summary of the day's financial news called the Customers' Afternoon Letter. It soon achieved a circulation of over 1,000 subscribers and was considered an important news source for investors. It included the Dow Jones stock average, an index that included nine railroad issues, one steamship line, and Western Union.
Simultaneously to his work in publishing, in 1885 Dow also served as a Partner in the NYSE brokerage house of Goodbody, Glynn and Dow where he remained until its dissolution six years later. His Partner, Robert Goodbody, was an Irish citizen and thus at that time ineligible to own a seat. By 1891, the men would part ways.
Birth of the Wall Street Journal
In 1889, the company had 50 employees. The first issue of The Wall Street Journal appeared on July 8, 1889. It cost two cents per issue or five dollars for a one-year subscription. Dow was the editor and Jones managed the deskwork. The paper gave its readers a policy statement: "Its object is to give fully and fairly the daily news attending the fluctuations in prices of stocks, bonds, and some classes of commodities. It will aim steadily at being a paper of news and not a paper of opinions." The paper's motto was "The truth in its proper use." Its editors promised to put out a paper that could not be controlled by advertisers. The paper had a private wire to Boston and telegraph connections to Washington, Philadelphia, and Chicago. It also had correspondents in several cities, including London.
Dow often warned his reporters about exchanging slanted stories for stock tips or free stock. Crusading for honesty in financial reporting, Dow would publish the names of companies that hesitated to give information about profit and loss. Soon after that, the newspaper gained power and respect from the reading public. Vermont Royster, a later editor of the Wall Street Journal, said Dow always believed business information was not the "private province of brokers and tycoons".
In 1898, the Wall Street Journal put out its first morning edition. The paper now covered more than just financial news. It also covered war, which it reported without rhetoric, unlike many other papers. Dow also added an editorial column called "Review and Outlook" and "Answers to Inquirers," in which readers sent investment questions to be answered. Edward Jones retired in 1899, but Dow and Bergstresser continued working. Dow still wrote editorials, now focusing on the place that government held in American business. The Wall Street Journal set a precedent in reporting during the election of 1900 by endorsing a political candidate, the incumbent president William McKinley.
Dow Jones Averages
The stock price average was created on July 3, 1884 by Charles Dow as part of the "Customer's Afternoon Letter". At its inception, it consisted of 11 companies—9 railroads and 2 non-rail companies, Pacific Mail Steamship and Western Union Telegraph. On September 23, 1889, the “20 Active Stock” index was introduced. It included 18 railroad and 2 non-rail stocks.
In the 1890s, Dow saw that the recession was ending. In 1893, many mergers began taking place, resulting in the formation of huge corporations. These corporations sought markets for their stock shares. The wildly speculative market meant investors needed information about stock activity. Dow took this opportunity to devise the Dow Jones Industrial Average (DJIA) in 1896. By tracking the closing stock prices of twelve companies, adding up their stock prices, and dividing by twelve, Dow came up with his average. The first such average appeared in the Wall Street Journal on May 26, 1896. Nowadays, the DJIA remains one of the oldest and popular stock indices in the world.
On October 25, 1896, Dow replaced the 2 non-rail stocks in the “20 Active Stock” index with 2 rail stocks and the index became the Dow Jones Railroad Average (DJRA). The DJRA remained a rail average of 20 stocks until January 2, 1970 when the average was changed to the Dow Jones Transportation Average (DJTA)—9 railroad stocks were replaced by 9 airline and trucking stocks.
Dow is a notable Sept of Clan Buchanan. Learn more about the Names of Buchanan