DOW JONES vs. NASDAQ vs. S&P 500
When evaluating the stock market, one of three stock market indices are likely cited as an indicator of its overall health from day to day. What does each measure and why is its information valuable? Here’s a brief look.Dow Jones The Dow Jones Industrial Average (its full name), the stock market’s easiest to understand index, monitors the average stock price of 30 of America’s largest, most influential corporations. If the cumulative average of these stock prices goes up by half a percent, the Dow also rises by half a percent. It uses these company’s stock prices to make generalizations about the stock market as a whole because these companies control a significant portion of economic assets thus their success or struggles usually have wide sweeping repercussions across the rest of the business world.S&P 500 Like the Dow, the S&P also keeps track of the average within a selection of companies though it is weighted by value instead of stock price and incorporates a much broader range of companies into the equation. As its name suggests, the S&P keeps tabs of 500 companies of various sizes, picked from differing sectors of the economy. The S&P relies on diversity and thorough industry representation to paint as accurate a composite picture as possible of the current state of the economy.NASDAQ Though NASDAQ tracks close to 3,000 companies though it focuses primarily on technology and electronically traded companies. The NASDAQ Composite also contains listings of United States and non-US companies so it cannot be considered exclusively an evaluation of the American economic climate. It is relied on primarily as a measurement stick for the tech sector of the economy and as reference for growth companies, expanding faster than the economy as a whole.