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From U.S. Rubber to Apple, the Dow Reflects a Changing Economy

Apple Inc. today joins the Dow Jones Industrial Average, replacing AT&T. For a listing originally based on heavy industry, the fact that Apple, the technology-driven consumer electronics company that has the largest market value in the world, is now entering the Dow reflects how much the economy has changed.

The Dow consists of 30 large publicly owned companies, reflecting the industrial structure and its performance in the U.S. economy. In its 119-year history, the Dow has changed its components 51 times.

When the Dow was first calculated in 1896, 12 companies were included, such as sugar, tobacco, gas, oil, coal, electric utility, rubber and others. Among the original companies, General Electric is the only one that remains.

The North American Company, an electric utility holding company, was the first company dropped from the Dow, followed by United States Rubber Company. In the early 1900s, the tobacco, leather, coal, iron, and railroad companies were excluded from the Dow, and were replaced by copper mining, car manufacturing, paper, and others.

By the mid-1950s, most of the original components of the index had been replaced, and consumer goods had become the majority in the Dow, such as American Can Co., AT&T, Eastman Kodak, General Foods, and others.

The inclusion of Apple is the newest change in the Dow’s components. Currently, the Dow includes 30 companies representing 14 industries:

Industry No. of companies Name of companies Share of the DJIA
Computer/Software 5
Cisco Systems
Banking/Financial Services 4
JPMorgan Chase
Goldman Sachs
American Express
Health Care/Pharmaceuticals 4
Johnson & Johnson
Conglomerate 3
General Electric
Apparel/Consumer goods 2
Procter & Gamble
Food/Beverages 2
Retailer 2
The Home Depot
Oil/Gas 2
Aerospace and defense 1   Boeing 5.3%
Entertainment 1 Walt Disney 3.7%
Chemical 1 DuPont 2.7%
Construction and mining equipment 1 Caterpillar 2.8%
Insurance 1 Travelers 3.8%
Telecommunication 1 Verizon 1.7%

Note: Share of each industry in the DJIA is calculated as the sum of stock prices of the companies in the industry divided by the sum of the total 30 companies’ price.

As summarized in the table, the top four industries (either by the number of companies or the share of the Dow) are computer and software, banking and financial services, health care, and conglomerates. This listing helps reinforce the widely accepted perspective that heavy industry is no longer the major driver of our economic growth and the service-based industries now play a critical role in economic development.

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