Indices Dow jones, S&P 500, and NASDAQ
The Dow Jones Indices, S&P 500 and NASDAQ are the three indices that are the main indicators in the United States.
Dow Jones Industrial Average (DJIA), Nasdaq and Standard & Poor’s 500, these stock indices reflect the movement of stock prices on the exchange.
In this world, there are more than 5000 stocks listed on the stock exchange.
With a large selection of stocks available on the exchange, it might make investors be confusing.
Especially beginners, feel more confused when he wants to buy shares.
Of the many indices in the world, indices from the United States are the largest with methodology and high liquidity.
Especially the three indices as the most look by analysts and investors around the world.
Massive news coverage from Dow Jones, S&P 500 and NASDAQ stocks adorn every page of the news portal as headlines.
This makes it possible that the influence of the three indices will greatly affect changes in shares on other exchanges, for example on Asian exchanges.
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Dow Jones Industrial Average (DJIA)
The Dow Jones Industrial Average is one of the indices most widely seen by investors, fund managers and analysts around the world.
The Dow Jones index has always been a reference for investors and observers of the stock market.
Not only those who trade on Wall Street, but also on any exchange throughout the world.
The Dow Jones index is the oldest index and the best-known index.
This index was first introduced by editors from The Wall Street Journal, whose parent company is Dow Jones & Co. in 1896
The inventors of the Dow Jones index are editors of the Wall Street Journal and founder of Dow Jones & Co. named Charles Dow.
He collaborated with statistician Edward Jones. So indices based their name.
These Indices were first calculated on May 26, 1896.
And published in the Customer Afternoon Letter, not in the Wall Street Journal.
In the beginning, there were only 12 companies that entered into the index calculation.
In 1928, the index was expanded to 30 issuers.
The composition of the Dow Jones index for the first time:
- American Cotton.
- Oil American.
- Sugar American.
- Tobacco Chicago.
- Gas Distilling & Cattle.
- Feeding General Electric.
- Laclede Gas.
- National Lead North.
- American Tennessee.
- Coal and Iron.
- U.S. Leather pfd.
- U.S. Rubber
The Dow Jones index is designed to describe the US economy.
Since the first launching, the index contained 12 issuers consisting of 4 railroad companies, cotton, gas, sugar, tobacco and oil companies
General Electric is one of the oldest companies that are members of the index since it was launched until 2016.
Dow jones times to time
Along with changes in the US economy that increasingly leads to industry.
Hence the issuers in the Dow Jones index get a change.
Fewer companies related to commodities, as substitutes are consumer and technology companies.
Dow Jones index constituent shares also come from the Nasdaq stock exchange.
Not only from the New York stock exchange like Apple.
The Dow Jones indices is an index that is calculated based on stock prices.
The value of Dow Jones is not solely the price of each stock but the amount of the price divided by a certain divisor number.
If there is a change in stock prices due to dividend distribution, the stock split will affect the index value.
So the Dow Jones indices continue to change.
There are several criteria for stocks to become constituents or listed on the Dow Jones index.
Among these is the company must be a very large company and a market leader in the industry.
Dow Jones for analyst
Dow Jones is often used by analysts to find out how the market responds, and some of what needs to be known are
- Indices Dow Jones reacts to events such as natural disasters, war, political unrest, and economic news.
- Using the Dow Jones indices for analysis means paying attention to current events and estimating what the market response is like.
- The Dow Jones indices also fluctuate based on economic reports, such as unemployment rates, job creation, interest rates, GDP figures, and other economic benchmarks.
- The Dow is a weighted price index. This means that stocks with higher values will have more influence on the index average than stocks with lower prices.
- Some analysts state that it does not reflect the overall condition of prices in the market.
- Changes in the value of the Dow tend to be related to overall market movements when the price changes are large volume.
The Standard & Poor’s 500 indexes or the S&P 500 gained popularity since 1957 was introduced by the rating agency Standard & Poor’s
The contents of the index are quite diverse reflecting the state of the US economy.
Consisting of 505 shares issued by 500 large issuers.
The capitalization of issuers included as constituents in this index is a minimum of 6.1 billion US dollars.
This index is an indicator to reflect the performance of stocks of large-cap companies.
Shares in the S&P 500 index are calculated by the Committee which consists of S&P analysts and economists.
The S&P 500 index is preferably used as a measure of shares in the US because it has members more than the Dow Jones indices, which has only 30 shares.
In addition, there are significant differences in the calculations from the two indices.
The S&P index uses the market capitalization methodology, which makes the weight of large-cap companies.
While the Dow Jones index is arranged based on price weights, the more expensive the stock price the greater the weight in the indices.
The composition of the S&P 500 indices is always evaluated periodically so that there are new companies that can be listed or exited.
Value indices S&P 500
The weight of each share in the S&P 500 is proportionally calculated.
Changes in the price of larger capitalized stocks will have more impact on the index value compared to stocks with smaller capital.
For example, in March 2000 the S&P 500 index reached its highest price at 1552.87 since an online business boom.
However, the index fell 50% again to the level of 768.63 on October 10, 2002, in line with the decline in share prices in the US.
Indices the S&P 500 again to reach the highest price on October 11, 2007, at 1576.09, but 2 years later it closed at its lowest level at 676.53 (March 9, 2009).
Since then, prices have rallied to 1848.36 on December 31, 2013, and new record highs occurred on July 3, 2014, and then in 1985.90.
With such high price fluctuations, the S&P 500 index is eligible to be traded on CFD (Contract for Difference).
The Nasdaq Composite Index
In addition to the two indices Dow Jones and S&P 500, there is one more index that is considered by investors and economic analysts, it’s NASDAQ COMPOSITE INDEX
The Nasdaq (National Association of Securities Dealers Automated Quotations) Exchange began operations in 1971 and was the first electronic exchange at that time.
Its main index is the Nasdaq Composite which contains around 3,000 shares listed on the Nasdaq stock exchange.
Issuers that enter in the Nasdaq index consist of various companies in various sectors, except the financial sector.
This index is arranged based on the capitalization method, the weight of each share on the index depends on its capitalization.
Every quarter there are adjustments to stocks in these indices.
The biggest portion of the Nasdaq index is the technology sector.
Technology shares weigh about 54% on these indices.
Therefore, the Nasdaq index is often a reference for the movement of technology stocks.
Other sectors are the consumer sector, such as restaurant stocks, retailers and tourism.
Because of the greater weight of technology shares.
The Nasdaq index is considered to be noisier compared to the S&P 500 which consists of various stocks from various sectors.
On the other hand, the potential for strengthening is the largest.
The rise and fall of the index are closely related to the ups and downs of the technology sector.
When the dotcom bubble burst in 2000, the Nasdaq index fell sharply.
These three indices are important references for stock investors.
All three consist of different shares, different calculations as well.
The main indices complement each other to find out a picture of the stock market and even the US economy.
All three indices above have been heavily traded in CFDs.
Where several brokers have provided platforms that also trade underlying asset indices.
So this also becomes an option of trading instruments in trade using margin trading.
However, indices analysis requires carefulness and accuracy when traders analyze data
So get information that reflects the condition of the index, and can get profits from changes in the index value.
Because trading using margin trading aside from offering high profits is also comparable with high risks.