Stock market indexes

An index follows a group of shares to show how a part of the market is doing.

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A stock market index follows the prices of a chosen group of companies and combines them into one number. When the news says "the market rose 1% today", it usually means an index rose 1%. You can't buy an index itself, but index funds try to copy one.

The best-known indexes

• S&P 500: about 500 large U.S. companies. It is the most followed measure of the U.S. stock market.
• Dow Jones Industrial Average: 30 large U.S. companies. Created in 1896, it is one of the oldest indexes.
• Nasdaq Composite: almost every company listed on Nasdaq, including many technology companies.
• Ibovespa: the main index of B3, Brazil's stock exchange.

How the S&P 500 is built

A committee at S&P Dow Jones Indices picks the companies. To join, a company must be based in the U.S., be large, have shares that trade often and have been profitable recently. Companies are added and removed several times a year, and StockLab's list follows those changes. The index holds a few more than 500 shares, because some companies, like Alphabet, have more than one class of shares.

Bigger companies count more

The S&P 500 weights each company by its market value, so the largest companies move the index much more than the smallest: a 5% rise in the biggest company changes the index far more than the same rise in the smallest. The Dow is different: it weights companies by their share price.