<p>The Dow Jones Industrial Average (DJIA), established in 1896, is a stock market index that tracks the performance of 30 large, publicly-owned companies in the United States. It is one of the oldest and most widely followed indices, providing a snapshot of the overall health of the American economy.</p>

<h2>How It Works</h2>
<p>The DJIA is a price-weighted index, meaning each company's influence on the index is proportional to its stock price. The index is calculated by summing the prices of the 30 stocks and then dividing by a divisor, which adjusts for stock splits and other changes. The DJIA is often used as a benchmark for the broader U.S. stock market, although it is not as diversified as other indices like the <a href="/NewSite/encyclopedia/sp500/" class="ency-link">S&P 500</a>.</p>

<h2>Why It Matters</h2>
<p>The DJIA is a key indicator of the U.S. stock market's performance and is closely watched by investors around the world. It provides a quick and easy-to-understand gauge of the market's direction, with a rise in the DJIA indicating a bullish market and a fall indicating a bearish one. Additionally, many companies in the DJIA are multinational corporations, so the index can also provide insights into global economic trends.</p>