What is the Nasdaq
Nasdaq is both a stock exchange and the name of two indexes heavy in technology companies. Here is which is which and why it swings more than other markets.
"The Nasdaq fell 2% today" is one of the most common lines in market news. The word Nasdaq is used for three different things, so it helps to know which one is meant.
1. The exchange
Nasdaq is a stock exchange in the United States, a marketplace where shares are bought and sold. Many large technology companies list their shares there.
2. The Nasdaq Composite
When the news gives "the Nasdaq" alongside the Dow and the S&P 500, it usually means the Nasdaq Composite. This index includes nearly every company listed on the Nasdaq exchange, which is several thousand companies. Like the S&P 500, bigger companies count for more.
3. The Nasdaq-100
The Nasdaq-100 is a narrower index of the 100 largest companies on the exchange that are not banks or other financial companies. Many popular funds track it.
Why the Nasdaq swings more
Both Nasdaq indexes are heavy in technology and other fast-growing companies. Investors pay for these companies' expected future profits. When interest rates or growth forecasts change, those expectations change quickly, so prices move more. See How interest rates move stock prices.
On a good day for growth stocks the Nasdaq usually rises more than the S&P 500. On a bad day it usually falls more.
The short version
- Nasdaq is an exchange and the name of two indexes.
- "The Nasdaq" in the news usually means the Nasdaq Composite.
- It leans toward technology, so it tends to move more than the S&P 500.
This is general information, not investment advice.
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