NEW YORK — The Dow Jones Industrial Average just closed above 40,000 for the first time, the latest pop in what’s been a surprisingly good year for Wall Street.
But just like New Year’s represents an arbitrary point in time in the Earth’s revolution around the sun, such milestones for the Dow don’t mean much inherently.
A screen shows the Dow Jones industrial Average in Seoul, South Korea on Aug. 9, 2011.
For one, with just 30 companies, the Dow represents a tiny slice of Corporate America. For another, almost no one’s 401(k) account sees its performance depend on the Dow, which has become more of a relic used for historical comparisons.
What’s more important is that the Dow at 40,000 is one example of how the broader U.S. stock market is setting records.
Here’s a look at what the Dow is, how it got here and how its use among investors is on the wane:
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What is the Dow?
It’s a measure of 30 established, well-known companies. These stocks are sometimes known as “blue chips,” which are supposed to be on the steadier and safer side of Wall Street.
What’s in the Dow?
Not just industrial companies like Caterpillar and Honeywell, despite the name.
The roster has changed many times since the Dow began in 1896 as the U.S. economy has transformed. Out, for example, was Standard Rope & Twine, and in recently have been big technology companies.
Apple, Intel and Microsoft are some of the newer-economy names currently in the Dow. The financial industry also has a healthy representation with American Express, Goldman Sachs, JPMorgan Chase and Travelers. So does health care with Amgen, Johnson & Johnson, Merck and UnitedHealth Group.
