The Dow Jones fell 254 points or 1.01%. The S&P 500 on the other hand fell 0.58% and the NASDAQ was up 0.13%. The Dow Jones is only a 30 stock price-weighted index and the reason it fell so much relative to the other indices is shown below. There was a 10% fall in Walmart. These are the Dow Jones biggest fallers overnight. When one of the 30 Dow Jones stocks falls a lot it has a big impact on the Dow Jones index which doesn’t necessarily show up in the S&P 500 or NASDAQ. So if you don’t hold Walmart it wasn’t that bad a night. Walmart is the world’s biggest retailer and last night announced a sharp drop in profit and online sales growth during the crucial holiday period. They also put out guidance for full-year profit be of the low end of expectations. Clear evidence that they are struggling to compete with the world’s biggest online retailer, Amazon.
The Standard & Poor’s 500, often abbreviated as the S&P 500, or just the S&P, is an American stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ.
Beginners Tip – The S&P 500 is a far more representative index than the Dow Jones which only covers 30 stocks and is a price-weighted rather than market capitalisation weighted index. It is a wonder, considering its construction, that we take any notice of the Dow Jones. If it didn’t exist and somebody came up with the idea to have a price weighted index with only 30 stocks today they would be laughed off the floor of the New York Stock Exchange. It is simply custom to look at the Dow Jones. Perhaps the reason it survives and is in common usage is because the index number (24,964) is almost 10 times the size of the S&P 500 index number (2716) so the movement in points is 10 times bigger on the Dow Jones making it more interesting. You think you can get a more accurate feel when you hear of a market up 50 rather than up 5. But for technical purposes the S&P 500 is vastly more relevant.