Dow Vs. Nasdaq Vs. S&P

by Tom Gresham, studioD

Daily reports of stock market activity often refer to the Dow, the S&P and Nasdaq. The Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite Index use selections of representative stocks to measure stock trends. Together, these indexes provide a snapshot of a mixture of stocks and provide a valuable way for investors to track the ups and downs of stock trading.

Index Providers

The Dow Jones Industrial Average is the oldest of the stock market indexes, in use since 1896. It is the most widely viewed of the Dow Jones indexes, but there are more than 130,000 Dow Jones equity indexes, according to CME Group, the index owners. Similarly, Standard & Poor's -- the manager of the S&P; 500 -- and Nasdaq -- the Nasdaq Composite Index provider -- also produce numerous other indexes of different sectors and equities. McGraw-Hill, a publishing company, owns Standard & Poor's. Nasdaq is the product of Nasdaq OMX, which operates the Nasdaq Stock Market, among other ventures.

Stock Sizes

The Dow Jones Industrial Average and the S&P; 500 focus on large-capitalization stocks, which have market capitalizations greater than $10 billion. Market capitalization is a measurement of a stock's outstanding shares. Indexes focus on large stocks to try to demonstrate overall trends in the market. The Dow, which includes 30 stocks, covers about 27 percent of available market capitalization. The S&P; 500 covers approximately 80 percent of available market capitalization. The Nasdaq Composite Index covers all of the more than 3,000 stocks listed on the Nasdaq Stock Market.

Stock Sectors and Exchanges

The Dow Jones Industrial Average and the S&P; 500 include stocks from the New York Stock Exchange and the Nasdaq Stock Market. The Nasdaq Composite Index includes only stocks that are listed on the Nasdaq Stock Market. The Dow Industrials do not include companies from the transportation and utilities sectors; those have their own Dow indexes. However, the S&P; 500 and the Nasdaq Composite -- known as "the Nasdaq" -- include companies from all industries. The Nasdaq also includes internationally based companies, unlike the Dow Jones Industrial Average and the S&P; 500.

Other Characteristics

The Dow and the S&P; 500 add and remove stocks from their indexes depending on changes in the companies, such as drops in market capitalization, or mergers or acquisitions that change company profiles. When weighing whether to add or remove a stock, these indexes consider aspects such as reported earnings in addition to market capitalization, industry and exchange. The less-followed Nasdaq 100, which focuses on large-cap stocks, more closely resembles the Dow and S&P; 500.

About the Author

Tom Gresham is a freelance writer and public relations specialist who has been writing professionally since 1999. His articles have appeared in "The Washington Post," "Virginia Magazine," "Vermont Magazine," "Adirondack Life" and the "Southern Arts Journal," among other publications. He graduated from the University of Virginia.

Zacks Investment Research

is an A+ Rated BBB

Accredited Business.