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What is the American stock market? Is it NASDAQ? Is it Dow Jones? What is the S & P 500?

Are you interested in knowing more about American stock market but never really understood where to begin with? Well, this article is just for you then!
It was 14th July 2020, a Tuesday, one of those days wherein I had a slow start to the day. So, I force myself out of bed, wash my face, grab a coffee and while I scrolled down through my messages, I received a text from my buddy Craig which read somewhat like this,

“Dude, Sensex is down by almost 500 odd points, and all stocks have taken a hit. For the first time, our recommendations are in the red! And there’s no reason to it I can figure out.”
This is the last thing you want to hear in the morning. So, I finished my coffee, and started checking out updates on the Sensex. Okay, there was a spike in coronavirus cases in India which dented in investor’s overall sentiment.
But more importantly, something had happened in the US. The S & P 500 dipped by almost 1% while the Nasdaq plunged by 2%.
So now it was clear.
American stock market plunged which directly resulted in a drop in Sensex. Yes, there was a global market somewhat also played its part, but it was mainly due to the US.
So, you may now ask me why does something happening in the other side of the world have implications with the investors in my country?
Well, because of various factors but mainly due macroeconomics and trade between the countries.
So, if you want a stable stock market, you need a stable economy, and a key pillar of stable economy is its relations with other countries for trade and other international transactions between the companies of the two respective economies. Here’s where exchange rate comes into play.
So now ask yourself one question: Who is the big daddy of them all?
It is the dollar. The world operates on dollars. And not to mention the US, who has the top 2 stock exchanges (more about that in a moment) along with the biggest GDP in the world at $21.44 trillion.
So, what happens in America is undoubtedly important to you, especially as an investor, no matter if you are in London, Johannesburg, Mumbai, or Sydney.
Okay, now since we have got that out of the way, here comes the million-dollar question:
What is the American stock market? Is it NASDAQ? Is it Dow Jones? What is the S & P 500?
Firstly, lets clear some misunderstandings. Due to the way investors use “the Dow”, “the Nasdaq” and “S & P 500”, one can be forgiven if they mistake them with “the market” or “the economy,” especially given the fact how some people can have an inaccurate idea of what each term actually means. However, they are not either, they are indexes similar to Sensex, Nifty 50 and Nifty100 which the investors can track. They are theoretical slices of the market that give investors an idea of how things are going in the market or the economy.
All the three refer to market indices.
Only the Nasdaq also refers to an exchange where investors can buy and sell stock.
Neither one is “the market” or “the economy.”
An investor cannot trade the Dow or the Nasdaq indexes because they each represent merely a mathematical average.
Investors can, however, purchase index funds or exchange-traded funds that track these indexes.
The Nasdaq is a term that can refer to two different things: first, it is the National Association of Securities Dealers Automated Quotations exchange, the first electronic exchange that allowed investors to buy and sell stock on a computerized, speedy, and transparent system, without the need for a physical trading floor.
The second reference is to an index.
When you hear people say that the “the Nasdaq is up today,” they are referring to the Nasdaq Composite Index, which, like the Dow Jones Industrial Average (DJIA), is a statistical measure of a portion of the market.
Both the Dow and the Nasdaq, then, refer to an index, or an average of a bunch of numbers derived from the price movements of certain stocks. The Nasdaq Composite contains all the companies that trade on the Nasdaq. Most are technology and internet-related, but there are financial, consumer, biotech, and industrial companies as well. The Nasdaq Composite tracks more than 3,300 stocks.
The DJIA is composed mainly of companies found on the New York Stock Exchange, with only a couple of Nasdaq-listed stocks such as Apple (AAPL), Intel (INTC), Cisco (CSCO), and Microsoft (MSFT).
In simpler terms, Nasdaq is somewhat like the Sensex of the US.
“The Dow” actually refers to the Dow Jones Industrial Average (DJIA), an important index that many people watch to get an indication of how well the overall stock market is performing. The Dow, or the DJIA, is not the same as Dow Jones and Company, the firm that is owned by News Corp. and publishes the Wall Street Journal.
Rather, the gauge is one of many indexes owned by S&P Dow Jones Indices LLC, a joint venture of S&P Global (SPGI), CME Group Inc., and News Corp. The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange (NYSE) and the Nasdaq.
The DJIA was invented by Charles Dow in 1896. It measures the performance of some the United States’ biggest, “blue chip,” companies. The industrial part of the name is largely historical; very few of the index’s component companies have anything to do with heavy industry anymore.
In simpler terms, the Dow is somewhat like the Nifty 50 of the US.
S & P 500
The S&P 500, or simply the S&P, is a stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices, and many consider it to be one of the best representations of the U.S. stock market. It is similar to the Nifty 500 index.
So, we hope after reading this article, you have clarity about the American Stock Market. If you have any doubts, please drop a comment and we will reach out to you.
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