Learn / What Is a Stock Market Index? S&P 500, Nasdaq and Dow Explained
GuideWhat Is a Stock Market Index? S&P 500, Nasdaq and Dow Explained
When the news says the market is up, it usually means a stock market index rose. An index is a list of companies whose combined performance is tracked as a single number.
The S&P 500
This index follows 500 of the largest US companies. It covers about four fifths of the value of the US stock market, so it is the most common measure of how stocks are doing.
The Nasdaq Composite
This index tracks thousands of companies listed on the Nasdaq. Many are technology and growth companies, so it tends to move more when tech is hot or cold.
The Dow Jones Industrial Average
The Dow follows just 30 large, well known companies. It is the oldest of the three and is still widely quoted, although it is a narrower picture of the market.
Why indexes matter
Indexes give you a benchmark. If your stock rose 2 percent on a day when the S&P 500 rose 3 percent, it lagged the market. They also form the basis of index funds and ETFs.
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Educational information, not financial advice.
