Both the financial news networks and regular news commentators throw out a lot of information when discussing how the stock markets have performed, especially on a day-by-day basis. As you try to keep up with the news, you may be wondering about the emphasis on the NASDAQ along with the more familiar Dow Jones Industrial Average.
The Big 3 Stock Indexes
The television screen or front page of almost every financial news source will list the current level and daily change for the three widely followed stock indexes. The Dow Jones Industrial Average, the oldest index, tracks the value of 30 major U.S. companies. The S&P 500 takes a broader approach, with 500 of the largest U.S. companies included in the index. The third index, the NASDAQ Composite, tracks all of the companies listed on the NASDAQ stock exchange. A down value on the NASDAQ occurs when the average of all of those stocks have declined for the day or whatever period of time is being discussed.
The NASDAQ stock exchange and the New York Stock Exchange -- NYSE -- are the two major U.S. exchanges. The DJIA and S&P 500 include stocks from both exchanges. The NASDAQ Composite index includes only NASDAQ stocks, but it includes almost every stock trading on the exchange. As an index tracking a full stock exchange, the NASDAQ Composite includes almost 2,500 stocks in its value. However, the index gives bigger companies larger weight in the index, so the 10 largest NASDAQ companies make up over one-third of the index value.
Importance of NASDAQ
The NASDAQ stands apart from the other stock indexes because the exchange is the home of many of the largest and most influential technology companies. The value of the NASDAQ is most affected by the stock prices of companies like Apple, Google, Amazon.com and Microsoft. Tech companies make over half the value of the NASDAQ Composite index, compared to less than 20 percent of the S&P 500 value. Investors who want to see how the tech sector is doing watch the NASDAQ value. Differences between the NASDAQ and other stock indexes often indicate that tech stocks are doing better or worse than the market at large.
NASDAQ Value Changes
During the business day, while the stock markets are open, the quote services will show how many points the NASDAQ is up or down for the day. After the market closes, the plus or minus will be for that day's action. To view longer-term trends for the index, use a price chart available from any of the online stock market news outlets. The charting systems allow you to view the results of any time period ranging from one day out to many years. In the course of your investment results, one day of up or down in the NASDAQ will have little overall effect.
Tim Plaehn has been writing financial, investment and trading articles and blogs since 2007. His work has appeared online at Seeking Alpha, Marketwatch.com and various other websites. Plaehn has a bachelor's degree in mathematics from the U.S. Air Force Academy.