How Long Did The Dow Take to Add 1000 Points?

Last week the Dow Jones Industrial Average closed above 13,000 points for the first time on April 25, 2007. Since then, the index has been setting record highs every day. The last time the Dow reached a milestone was on October 20, 2006, when it broke the 12,000 mark. That’s only 6 months and 5 days. But, this is not the shortest time. The record, so far, belongs to the period from October 14, 1995 to February 13, 1996 when the Dow went from 6010 to 7022 in 4 months plus 1 day.

The following is a plot of the history of the Dow, starting from October 1, 1932 when it had a value of 300 points, the earliest data available from Yahoo Finance.

dow.jpg

The Dow Jones index was born on July 3, 1884, and it took the index more than 88 years to reach its first 1000 on November 14, 1972. During the first 88 years of its history:

1. The original Dow Jones Industrial Average index, published on May 26, 1898, had an initial value of 40.94 and it included twelve components:

  • American Cotton Oil (now part of Unilever)
  • American Sugar (now Amstar Holdings)
  • American Tobacco
  • Chicago Gas (now Integrys Energy Group)
  • Distilling and Cattle Feeding (now Millennium Chemicals)
  • General Electric
  • Laclede Gas (now The Laclede Group)
  • National Lead (now NL Industries)
  • Tennessee Coal & Iron (now part of U.S. Steel)
  • North American
  • U.S. Leather
  • U.S. Rubber (now part of Michelin)

Any familiar names? I didn’t recognize any except GE.

2. The index closed at 28 on August 8, 1896, the lowest closing value ever.
3. The Dow lost 89.19% of its value during the great depression (total 340 points) from September 3, 1929 to July 8, 1932.

The Dow then took another 14 years to add another 1000 points. On January 8, 1987, the index closed at 2002. However, the index suffered its biggest loss, percentage wise, nine months later. On October 19, 1987, the Black Monday crash shed the Dow by 508 points, good for nearly 23% of its value at that time. Since then, the growth of the Dow accelerated. It took the index a little more than four years to almost triple its value from the close of 4003 on February 23, 1995 to 11014 reached on May 3, 1999. During this period, the index used an average of a little more eight months to add 1000 points. It also reshuffled its components on November 1, 1999 when Chevron, Goodyear Tire, Sears, and Union Carbide were replaced by Home Depot, Intel, Microsoft, and SBC Communications.

Then the financial markets went through some tough times, from the burst of the dot com bubble to the attacks on September 11, 2001, which led to the biggest loss in points on September 17, 2001 when 685 points, or more than 7%, were evaporated in a single day. By the end of that week, the Dow had fallen 1370 points, or 14.3%. The following recession took steam out of the financial markets and the Dow had to wait seven and a half years to see another milestone of 12000, reached on October 20, 2006. On April 8, 2004, the Dow changed its components again by replacing International Paper, AT&T, and Eastman Kodak by Pfizer, Verizon, and AIG.

Now, how long do you think will the Dow take to gain another 1000 points from here? I think we may just see that before the year end. My reason? I heard on the radio this morning from a commercial said that the Dow rarely had a losing record the year before the election, :)).

Sources: Yahoo Finance, Wikipedia, and History of Dow Jones

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