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The Dow Jones Industrial Average, also known as the Dow or DJIA, tracks 30 large, well-known companies that trade on the New York Stock Exchange and Nasdaq. The Dow kept hitting record highs in late 2024, reaching over 45,000 in December of that year.
The Dow’s surge was fueled by growing optimism about interest rate cuts, easing oil prices, and economic recovery. Earlier in the year, Amazon Inc. (AMZN) replaced Walgreens (WBA), which had only been in the index since 2018 and was the DJIA’s worst performer in 2023. Below, we take you through other critical moments in this crucial stock market benchmark.
Key Takeaways
- The Dow Jones Industrial Average (DJIA) is one of the most followed equity indexes, tracking 30 large-cap, well-known companies that trade on U.S. stock exchanges.
- Because it represents the largest blue-chip companies, the DJIA is often used as a proxy for the health of the stock market as a whole.
- The Dow hit its record high on Dec. 4, 2024, closing at over 45,000 points.
A Brief History of the Dow
Journalist Charles Dow and his business partner, Edward Jones, established the Dow Jones Industrial Average in 1896 with 12 companies in the industrial sector. The number of companies included in the index increased to 20 in 1916 and then to the current number, 30, in 1928. Since then, the Dow has remained among the most frequently discussed and commonly tracked equities indexes.
Notable Milestones for the Dow
The following are some milestones achieved by the Dow Jones Industrial Average. In parentheses, when helpful, we provide the Dow’s points as inflation-adjusted to Feb. 23, 2024, for a relative comparison to its record highs.
- March 15, 1933: The largest one-day percentage gain occurred during the market turmoil of the 1930s, when the Dow increased 15.34%, up 8.26 points to close at 62.10 (about 1,520 points, inflation-adjusted).
- Oct. 19, 1987: The day of the Dow’s largest one-day percentage drop came to be known as Black Monday, as the average fell 22.6%. The exact causes of the crash remain a mystery, although program trading may have played a role.
- Jan. 25, 2017: The Dow closed above 20,000 points for the first time.
- March 16, 2020: The Dow crashed amid the COVID-19 pandemic, falling close to 3,000 points in a single day after several drastic changes up and down.
- Nov. 16, 2020: The Dow returned to its pre-pandemic high, jumping to 29,950.44.
- Nov. 24, 2020: The Dow exceeded 30,000 points for the first time, closing at 30,046.24.
- May 16, 2024: The Dow surpassed 40,000 for the first time.
- Sept. 27, 2024: The Dow hit a record high of 42,628.32 points during intraday trading.
- Oct. 9, 2024: The Dow moved still higher, closing at an all-time high of 43,065.22 after it emerged that many of the shot callers at the Federal Reserve want to reduce interest rates more aggressively.
- Dec. 4, 2024: The Dow closed above 45,000 for the first time amid expectations of continued rate cuts.
Dow All-Time Highs
The Dow consistently hit new highs during the 2010s. The longest bull market in history lasted about 11 years, starting in March 2009 and ending in February 2020.
Many records were set in 2019, thanks partly to trade talks with China that boosted firms in the index. The Dow had 22 record closes in 2019.
The Dow finally broke the 30,000 mark the following year. Uncertainty had been hanging over the markets because of the unprecedented refusal of the outgoing president, Donald Trump, to concede the election to President-elect Biden. When Trump began the transition process late in November, 2020, stocks roared back.
The index also had a banner year in 2021. The Dow climbed to 31,522.75 points Feb. 16, 2021. It hit an all-time high of 34,200.67 points on Apr. 16, 2021. In the autumn, it began to consistently close above 35,000 points, and by the last week in December 2021, it surpassed 36,000 points.
Another big rally started at the end of October 2023. Through much of 2022 and 2023, investors were cautious and bearish about equity markets as inflation rocketed. Then, in the last few months of 2023, investors began piling back in as hopes grew that interest rates would soon be cut and a nasty recession averted. By the end of 2023, the previous high, registered in January 2022, had been surpassed, and the 37,000 mark had been breached.
Confidence that a recession could be averted continued into 2024. The Dow climbed above 38,000 in January 2024 and reached 40,000 by May. The index peaked again in July, almost reaching 42,000, then rallied in September when the Fed started cutting interest rates for the first time since 2020.
Over the following months, the index continued to surge amid expectations that the Fed would continue cutting interest rates. The index reached a record high of 43,065.22 in Oct. 2024. Shortly after, it surged even higher, closing above 45,000 on Dec. 4, 2024.
Dow All-Time Lows and Plunges
While the recent decade has shown strong economic growth, leading to plenty of record highs for the Dow, there have been significant plunges as well, both over longer periods and in dramatic single-day or single-moment drops.
Perhaps the most infamous trough was during the Great Depression, in which the Dow lost about 90% of its value over three years. It hit a low of 41.22 in 1932 (about 908 points, inflation-adjusted).
22.61%
The largest single-day drop, percentage-wise, that the Dow has had occurred when the market crashed on Oct. 19, 1987, Black Monday. However, in points, the Dow’s worst day was March 16, 2020, when it fell 2,997.1 points in reaction to the pandemic-era adoption of lockdowns throughout the U.S. and the Federal Reserve slashing interest rates to near zero.
Since the Great Depression, 2007 to 2008 has been the most dramatic period for the DJIA. The market fell more than 50% in just a year and a half because of subprime mortgage and credit crisis that kicked off the Great Recession.
Previously, the Dow had fallen from 11,723 in January 2000 to 9,389 in March 2001, dropping 20% (from 20,520 to 16,434 points, inflation-adjusted). The bout of inflation that followed the COVID-19 pandemic led to another sharp sell-off in 2022. Between Jan. 7, 2022, and Sept. 30, 2022, the Dow declined about 21% from 36,231.66 to 28,725.51.
The recession from 1973 to 1975 also led to a falloff for the Dow, which dropped 45% from its 1,051 peak in 1973 to just under 600 in 1974 (about 7,486 and 3,871 points, respectively, inflation-adjusted). The Dow also lost 26.5% during the Cuban missile crisis of 1962.
How Are Companies in the Dow Jones Industrial Average Selected?
The Dow tracks 30 large, publicly owned blue-chip companies trading on the New York Stock Exchange and the Nasdaq. The selection is not based on strict quantitative criteria but rather on the decisions of the editors of the Wall Street Journal. Companies are chosen based on their reputation, growth, and relevance to the economy, with the aim of reflecting the overall health and trends of the industrial sector of the U.S. economy.
How Often Does the Dow Jones Industrial Average Change?
When a company undergoes significant changes, such as a merger, acquisition, or substantial shifts in its business model, or when there’s a need to better represent the current state of the economic sectors, adjustments are made. These changes are not done often to ensure the index’s stability and continuity.
What Are the Drawbacks of the Dow Jones Industrial Average?
Since the Dow tracks just 30 large-cap U.S. companies, some critics argue that it is too narrow to represent the state of the overall U.S. economy. Given its large-cap focus, the roster of companies included in the Dow fails to include companies of other sizes. Many market observers think the S&P 500 is a much better representation of the economy, as it includes 500 companies and draws more widely from different sectors.
How Do I Invest in the Dow Jones Industrial Average?
What Do the Points in the Dow Jones Industrial Average Mean?
Because of the price-weighted calculation method, a $1 change in the price of a stock in the DJIA doesn’t equate to one point in the index since that depends on the Dow divisor at the time. As such, point moves are a way to measure the relative change in the index’s value. That said, when comparing the value of the DJIA over time, many financial sites, as we have done above, use an inflation-adjustment calculator such as the U.S. Bureau of Labor’s CPI since this gives the relative change over time. This method, though, is imperfect and provides only a rough snapshot since it doesn’t account for dividends accrued, different inflation effects across economic sectors, or changes in the index’s weighting or composition over time.
The Bottom Line
The Dow posted its all-time high during in December 2024, peaking at over 45,000 points. The new highs reflected optimism that the Federal Reserve would continue to cut interest rates and that the incoming administration would promote business growth.
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