bullish session for the Dow Jones Industrial Averagewhich ended the session on Friday, August 5, with slight increases in 0.23%until the 32,803.47 points. The Dow Jones Industrial Average marked a maximum volume of 32,814.61 points and the minimum number of 32,489.62 points. The trading range for Dow Jones Industrial Average between its highest point and its lowest point (maximum-minimum) during this day stood at 0.99%.
If we consider the data of the last week, the Dow Jones Industrial Average marks a drop in 0.13%so that for a year it still maintains a decrease in 6.45%. The Dow Jones Industrial Average stands a 10.86% below its maximum this year (36,799.65 points) and a 9.75% above its minimum valuation for the current year (29,888.78 points).
What is a stock index and what is it for?
a stock index It is an indicator that is used to know the evolution of the price of a certain set of assets.for which it collects data from various companies or sectors of a part of the market.
These indicators are mainly used by the stock markets of various nations and each of them can be integrated by firms with specific characteristics such as having a similar market capitalization or belonging to the same type of industry, likewise, there are some indices that only consider a handful of shares to determine their value or others that consider hundreds of shares.
Stock market indices serve as indicator of confidence in the stock market, business confidence, the health of the national and global economy and the performance of investments in shares and company shares. If investors lack confidence, stock values will tend to fall.
They also work to measure the performance of an asset manager and they allow investors to be able to compare between profitability and risk; measure the opportunities of a financial asset or create portfolios.
This type of indicators began to be used at the end of the 19th century after journalist Charles H. Dow. carefully analyzed how company stocks tended to go up or down together in price, so he created two indices: one containing the top 20 railroad companies (since it was the biggest industry at the time), as well as 12 actions of other types of businesses
Currently there are various indices and can be grouped based on geography, sectors, company size or even asset typeFor example, the US Nasdaq index is made up of the 100 largest companies mostly related to technology such as Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Facebook (FB), Alphabet (GOOG), Tesla (TSLA ), Nvidia (NVDA), PayPal (PYPL), Comcast (CMCSA), Adobe (ADBE).
How is it calculated and how to read them?
Each stock index has its own calculation method, but the main component is the market capitalization of each firm that integrates it. This is obtained by multiplying the value of the day of the title in the corresponding stock market by the total number of shares that are in the hands of the investors.
Firms listed on the stock exchange are required to present a balance of its composition. Said report must be made public every three or six months, as the case may be.
Reading a stock index also implies being careful of its evolution over time. Current indices always start with a fixed value based on stock prices on your start date, but not everyone follows this method. Therefore, it can be confusing.
If one index grows 500 points in a day, while another only adds 20, it might seem that the first index performed better. However, if the former started the day at 30,000 points and the other at 300, you can see that, in percentage terms, the gains for the latter were more remarkable.
What are the main stock indices?
Between the major US stock indices There is the Dow Jones Industrial Average, better known as dow jonesmade up of 30 companies., the S&P 500, comprising 500 of the largest companies on the New York Stock Exchange. Lastly, do not forget the Nasdaq 100which links 100 of the largest non-financial firms.
On the other hand, the most important indices of Europe are the Eurostoxx 50, which covers the 50 largest companies in the eurozone. On the other hand, the DAX 30, the main German index containing the strongest companies on the Frankfurt Stock Exchange; the FTSE100 from the London Stock Exchange; the ACC 40 of the Paris Stock Exchange; and the IBEX 35of the Spanish stock market.
In Asiathe main stock indices are the Nikkei 225, made up of the 225 largest companies on the Tokyo Stock Exchange. There is also the SSE Composite Index, which can be considered the preponderant of China, made up of the most relevant companies on the Shanghai Stock Exchange. The same role played by Hang Seung Index in Hong Kong and the KOSPI in South Korea.
Talking about Latin Americayou have the CPIwhich contains at 35 most prestigious firms of the Mexican Stock Exchange (BMV). At least a third of them are part of the estate of tycoon Carlos Slim.
Another is the Bovespa, made up of the 50 most important companies on the São Paulo stock exchange; the merval from Argentina; the IPSA From Chile; the MSCI COLCAP from Colombia; the IBC of Caracas, made up of 6 companies from Venezuela.
Also, there are other types of global stock indices such as the MSCI Latin Americawhich includes the 137 most important companies in Brazil, Chile, Colombia, Mexico and Peru.
Similarly, there is the MSCI World, which includes 1,600 companies from 23 developed countries; the MSCI Emerging Markets, made up of more than 800 companies from developing countries; and the S&P Global 100made up of the 100 most powerful multinational firms on the planet.