What Is the US 30?

What Is the US 30?

Let me tell you about the US 30, or Dow 30—it's a widely watched stock market index made up of 30 large U.S. publicly traded companies. You might know it as the Dow Jones Industrial Average or simply 'the Dow.' This index follows the combined share price performance of what a committee sees as the most important names on the New York Stock Exchange (NYSE) and Nasdaq, but it leaves out transportation and utility companies.

For many people, the US 30 serves as a barometer of the U.S. stock market and economy. It's managed by S&P Dow Jones Indices, with constituents chosen by a committee. Remember, it's price-weighted, so each company's stock is weighted by its price per share. The index value comes from adding up all the stock prices of its 30 components and dividing by the Dow divisor.

Key Takeaways

Here's what you need to know: the US 30 is a stock market index with 30 large U.S. companies. It's also called the Dow or Dow Jones Industrial Average. People see it as one of the best indicators of the U.S. stock market and economy. That said, critics say it doesn't represent the market well because it only has 30 large-cap companies and isn't weighted by market capitalization.

Understanding the US 30

When the media says the stock market is up or down, they're often referring to the US 30. Its movements act as a proxy for the overall stock market performance. It also indicates the general health of the U.S. economy—these companies provide jobs and their products are used by most Americans, depending on spending habits.

In short, if US 30 companies are doing well, the economy is likely in good shape. If they're struggling, tougher times might be ahead. You can invest in the US 30 through ETFs like the SPDR Dow Jones Industrial Average ETF or the iShares Dow Jones U.S. ETF. These let you buy into 30 of America's largest blue-chip companies, which have big customer bases, steady revenues, profits, and excess cash—making them highly desirable.

History of the US 30

The US 30 was created by journalist Charles Dow and Edward Jones in 1896—it's the second oldest U.S. stock market index. They also founded the Wall Street Journal. Back then, it was meant to track the stock market's performance when information was limited, helping ordinary investors see the market's direction.

It started with 12 companies focused on commodities, reflecting 19th-century America's economy. It expanded to 20 stocks in 1916 and 30 in 1928. To get into the Dow 30 and stay there, a company must be part of the U.S. economy's backbone.

Companies of the US 30

The full name is Dow Jones Industrial Average, which is a bit misleading now since the early focus was on heavy industries from the Industrial Revolution. The name stuck, even as the economy and index changed. There's no strict rule for inclusion—a committee from S&P Dow Jones Indices and Wall Street Journal decides based on excellent reputation, sustained growth, and investor interest.

The current companies are household names across sectors, many long-time members. The index can change anytime, but tweaks are rare. As of November 8, 2024, Nvidia Corp. (NVDA) replaced Intel Corp. (INTC), and Sherwin-Williams Company (SHW) replaced Dow Inc. (DOW).

How Is the US 30 Calculated?

The Dow 30 calculation differs from other indexes. You add up the stock prices of its 30 components and divide by the Dow divisor, which accounts for stock splits, mergers, and dividends. Originally, Charles Dow just added the closing prices of 12 stocks and divided by 12.

It's price-weighted, so higher share prices mean more weight, not market capitalization.

The US 30 and the S&P 500

People often compare the Dow Jones Industrial Average (DJIA) to the S&P 500. Both measure stock performance, but the DJIA is price-weighted while the S&P 500 is market-cap weighted. They have different inclusion criteria, and the S&P 500 covers 500 companies, making it preferred by some for better representation.

Disadvantages of the US 30

Critics say the Dow doesn't represent the U.S. economy well with only 30 large-cap companies, ignoring smaller ones. They prefer the S&P 500 for its 500 companies and diversification. Also, price-weighting can overemphasize high-priced stocks regardless of market cap.

Why Is the US 30 Important?

The US 30 is seen as a barometer of the stock market and economy—rising means good times and profits, falling suggests the opposite.

What Is the Difference Between the S&P 500 and the US 30?

Both track U.S. companies, but the Dow has 30 stocks, is price-weighted with a divisor, and committee-selected, while the S&P 500 has 500, is market-cap weighted, and follows a formula.

Why Is It Called US 30 or Dow 30?

It's named after Charles Dow and consists of 30 companies—full name Dow Jones Industrial Average.

The Bottom Line

The US 30 is one of the most discussed indexes since 1896, covering America's top blue-chip companies. It's a debated barometer of the market and economy, hand-picked, price-weighted, and calculated with the Dow divisor. Not everyone agrees with it, but its influence is undeniable.