What this lesson is about
When the news says "the market was up today," they usually mean this one index. 500 of the largest U.S. companies, bundled into a single number.
Part 1 of 2
When a news anchor says "the market was up today," they usually refer to one thing: the S&P 500. This index tracks about 500 of the largest publicly traded companies in the United States. An index isn't a company you can buy. It's a measurement tool. It’s a single number calculated from the stock prices of all 500 companies. It's designed to show the health of the U.S. stock market, at least for its largest players, all in one glance.
The S&P 500 is "market-cap-weighted." This means that companies with a larger market value affect the index's movement more than smaller companies do. A big price swing at Apple or Microsoft moves the index much more than the same percentage change at one of the smallest members. Standard & Poor's introduced the S&P 500 in 1957, building on a smaller 90-stock index that went back to 1926.
Quick check
What is the S&P 500?
It's an index - a tool for measuring the combined performance of a specific group of stocks, not a company or a fund itself, though many funds are built to track it.
Part 2 of 2
Quick check
How are companies weighted within the S&P 500?
Because it's market-cap-weighted, a large swing in a giant company's stock price moves the S&P 500 much more than the same percentage swing in a smaller company within the index.
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