[FOUNTAIN]The almighty DowThe Wall Street Journal is indisputably the quintessential business newspaper published in the United States. But for some time after being launched in 1884, the Journal was a mere regional newspaper sold only in New York City and surrounding areas. What catapulted the newspaper to its current status was the Dow Jones Industrial Average.
Charles Dow, the founder of the Journal, originated the Dow Jones Index in 1896. He thought that a table of closing stock prices would not satisfy the newspaper's readers, who were eager to get a quick grasp of what happened on Wall Street. In the beginning, there were two Dow Jones indexes. The railroad index averaged the stock prices of railroad companies, which were real blue chips at that time. The industrial index focused on general manufacturing businesses. But in the 20th century, as the era of manufacturing began, the industrial averages became the representative Dow Jones Index.
Past and present, the Dow Jones Industrial Average carefully chooses only representative firms in the United States, and calculates average stock prices. Its initial figure was 40.94 points. The number of stocks was originally 12 but was increased to 30 in 1928, still the number today.
The stocks used to be exclusively chosen from among companies listed on the New York Stock Exchange, but since 1997, "new economy" companies such as Microsoft and Intel have joined the index.
The Dow Jones Index, which has experienced honor and disgrace within the American economy, is recently undergoing another hardship. The index flourished in its so-called golden age of the 1990s, but after the new economy's bubble burst, and following incessant accounting fraud, the index has plummeted alarmingly. Accord-ing to a Wall Street Journal's analysis story titled "Has the market hit bottom?" which appeared Monday, the recent bear market is the fifth worst in terms of decline percentage since the Great Depression.
From 11,722.98 points as of Jan. 14, 2000, the recent peak of the Dow Jones Index, to 7,702.34 points as of July 23, 2002, the recent trough of the index, the Dow nose-dived by 4,020.64 points, or 34.3 percent during 920 calendar days.
One of our most nettlesome puzzles is that no experts can guarantee whether July's market hit bottom or not. This August is likely to be an important period to unravel that puzzle. It is not only Wall Street that wishes the hardships of the Dow Jones Index to end.
The writer is a JoongAng Ilbo editorial writer.
by Sohn Byoung-soo