The forgotten two thirds of Charles Dow's work — including an index older than the Industrial Average, and a theory of market confirmation that technical analysts still use.
The Dow Jones Industrial Average has two siblings, and one of them is older. The Transportation Average traces to 1884 — originally an index of railroad stocks, twelve years before the industrials — which makes it the oldest continuously maintained US stock index. The Utility Average followed in 1929.
Both are price weighted and committee selected, sharing the methodology and therefore the quirks described on the industrial average's page.
The reason these indexes still get attention is an idea Charles Dow developed in editorials and others formalised after his death: the averages should confirm one another.
The reasoning was concrete. If manufacturers are producing more, the railroads must be carrying more. Industrial share prices rising without transport prices following suggested the production was not reaching customers — a divergence worth noticing.
Critics point out the obvious: the economy that logic describes no longer dominates. Software, services and finance do not generate freight. Adherents counter that goods still move, and that the transport sector's exposure to fuel costs and consumer demand keeps it informative.
Treat it as a lens with a known origin rather than a rule. Its persistence says as much about the durability of a good metaphor as about its predictive value.
Fifteen electricity and gas companies, added in 1929. Utilities are capital-intensive, heavily regulated, and pay substantial dividends — which makes the average behave less like an equity index and more like a rate-sensitive instrument.
When long-term interest rates rise, utility shares typically come under pressure, because their dividend streams compete with bonds and their heavy borrowing costs more. Analysts sometimes read the average as an early indication of rate expectations for that reason.
The principle that the industrial and transportation averages should move together, and that divergence between them is a warning sign. It originated in Charles Dow's editorials and was formalised after his death.
Contested. The manufacturing-and-freight logic describes an economy that no longer dominates US output, though transport remains a real economic signal. Read it as a lens, not a rule.
Because they behave differently from other equities — regulated, capital-intensive and rate-sensitive — which makes them worth tracking separately.