The Dow Jones Industrial Average opened the day unchange. With a variation of 0.16% to 32,990.09 points at the start of the opening session. Comparing this figure with those of previous days. The Dow Jones Industrial Average has now been in the red for four consecutive sessions.
If we consider the data of the last seven days, the Dow Jones Industrial Average is down 3.51%. In year-on-year terms it is still down 5.82%. The Dow Jones Industrial Average is 3.83% below its high for the year (34,302.61 points) and 0.18% above its low for the year (32,930.08 points).
Wall Street’s main gauge opens on 20 January
Stock market indices… What for?
A stock market index is an indicator that shows how the value of a given set of assets evolves. So it needs to have data from different companies or sectors of a part of the market.
These indicators are mainly used by the stock exchanges of different nations. Each one of them made up of companies with specific characteristics such as having a similar market capitalisation or belonging to the same industry. In addition, there are some indices that only consider. A handful of shares to determine their value or others that consider hundreds of shares.
Wall Street’s main gauge opens on 20 January
Stock indices serve as an indicator of confidence in the stock market. Business confidence, the health of the national and global economy. The performance of a company’s stock and equity investments. If investors lack confidence, stock values would tend to fall.
They also function to measure the performance of an asset manager and allow. A comparison between profitability and risk. Measure the opportunities of a financial asset or to create portfolios.
These types of indicators began to be used at the end of the 19th century after the journalist Charles H. Dow carefully analysed how company shares tended to rise and fall together in price, so he created two indices: one containing the 20 most important railway companies (as it was the most important industry at the time), as well as 12 shares of other types of business.
For example, the US Nasdaq index is composed of the 100 largest technology-related companies such as Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Facebook (FB), Alphabet (GOOG), Tesla (TSLA), Nvidia (NVDA), PayPal (PYPL), Comcast (CMCSA), Adobe (ADBE).
How to read an index?
Each stock index has its own way of being calculated, but the main component is the market capitalisation of each constituent company. This is obtained by multiplying the day’s value of the stock on the relevant exchange by the total number of shares held by investors.
Listed firms are obliged to present a balance sheet of their composition. Such a report must be made public every three or six months, as the case may be.
Reading a stock index also requires observing its variations over time. Current indices always start with a fixed value based on the share prices at their inception date, but not all of them follow this method. As a result, it can appear misleading.
If one index rises 500 points in a day, while another only gains 20 points, it might appear that the former outperformed the latter. However, if the former started the day at 30,000 points and the latter at 300, it can be assumed that, in percentage terms, the gains for the latter were more significant.
