Like the S&P 500, the NASDAQ uses a market-cap weighting formula. The NASDAQ 100 aggregates 100 of the largest and most actively traded non-financial domestic and international stocks traded on the NASDAQ Stock Market. That said, long term, the Dow and S&P 500 have had similar performance: From January 1920 to 2020, the DJIA averaged 10.1% annual returns, with dividends reinvested while the S&P 500 averaged 10.3%. Price drops that are small percentages of share prices may have outsize impacts on the Dow in companies with smaller market caps but expensive shares. This difference in price weighting versus market-capitalization weighting can cause the DJIA to be more volatile than the S&P 500 short term. If Company XYZ has relatively few shares (and therefore a smaller market cap), that dip won’t be felt as strongly in the S&P 500 as it would in the Dow, where its high price commands more clout. Here’s how that plays out: When Company XYZ’s share price of $2,000 falls to $1,999, its decrease may be disproportionately felt in the Dow due to the high share price. Because it’s more diversified and considers companies based on market cap, it may be a better indicator of the overall stock market’s performance. Unlike the DJIA, the S&P 500 is market capitalization-weighted, not price-weighted. S&P 500īecause it tracks the performance of 500 of the largest public companies, the S&P 500 is much broader in scope than the DJIA. Here’s how it compares to two other common stock indexes. The Dow is one of a few equity indexes used to measure and understand the performance of the U.S. How Does the DJIA Compare to Other Indices? The difference in how the Dow weights its index can lead it to have more short-term ups and downs than market-cap-based indexes. These consider a company’s market capitalization when determining how much influence it will have in an index. The Dow’s approach is unlike other leading indexes used to track the overall performance of the stock market, like the S&P 500 or the NASDAQ. Because of this, companies with fewer expensive shares have a larger impact on the Dow’s value than companies with many cheaper shares. The DJIA’s price weighting does not account for market capitalization, which is the total market value of all of a company’s shares. This means that the Dow gives more weighting to companies with more expensive stock. International Business Machines Corporation The following 30 companies are presently included in the DJIA:Ĭompanies in the DJIA Index Dow Components Companies included in the Dow are referred to as components. In the course of its lengthy history, its holdings have changed just 60 times, or about an average of every two years. The Dow’s composition does not change often. ![]() The only industries not currently included are transportation and utilities. The DJIA contains leading companies from many industries, including information technology, healthcare, and consumer discretionary. Because of the prominence of the companies in the Dow and the age of the index itself, experts and financial commentators often use its performance as shorthand to describe the overall stock market. These stocks are from large companies with long histories of strong performance. In its modern form, the DJIA tracks the prices of 30 blue-chip stocks. stock market and global bond markets to the market for gold. There are indexes for almost everything, from the overall U.S. An index tries to model a particular industry or market-or even entire national economies. Stock market indices like the Dow track the prices of a group of securities. The Dow Jones Industrial Average is one of the oldest market indexes, first created in 1896. Investors follow the index in order to gauge the overall performance of U.S. The DJIA is a leading benchmark for the largest blue-chip stocks in the U.S. Like the S&P 500, the DJIA is often used to track the overall performance of the entire stock market. CNN Sans ™ & © 2016 Cable News Network.The Dow Jones Industrial Average-also known as the DJIA, or simply the Dow-is a stock market index that tracks the share prices of 30 of the largest U.S. Market holidays and trading hours provided by Copp Clark Limited. ![]() All content of the Dow Jones branded indices Copyright S&P Dow Jones Indices LLC and/or its affiliates. Standard & Poor’s and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. ![]() Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Chicago Mercantile: Certain market data is the property of Chicago Mercantile Exchange Inc. US market indices are shown in real time, except for the S&P 500 which is refreshed every two minutes. Your CNN account Log in to your CNN account
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