S&P, Dow, Nasdaq — which "market" is on the news?

Nightly news quotes three American numbers as if interchangeable. They aren't. Each answers a different question — and worldwide, every country runs its own trio of sticks. Here's the decoder.

The US trio

• S&P 500 — ~500 large US companies, cap-weighted. The professional default for "the US stock market"; the benchmark most funds are measured against and most index money tracks.
• Dow Jones Industrial Average — just 30 blue-chip names, price-weighted (last lesson's fossil). Its superpower is cultural: 130 years of continuity make it the number your grandparents also heard.
• Nasdaq Composite / Nasdaq-100 — companies listed on the Nasdaq exchange; the 100 excluded financials until the December 2025 reconstitution. Heavy in technology, so it runs hotter both ways — the growth-mood thermometer.

One market, three thermometers: on many days they disagree, and the disagreement IS the information (tech leading? old economy? everything together?).

How far apart the three can drift comes down to concentration. In the S&P 500 the ten largest companies carried roughly a third of the whole index's weight in 2025; in the Nasdaq-100, about half. So a strong day for the handful of giant technology names lifts the Nasdaq-100 a lot, the S&P 500 somewhat, and the Dow — where a company's vote is its share price, not its size — by whatever its priciest members happened to do. An equal-weight version of the S&P 500 also exists, in which every company counts for one five-hundredth, and on the days it disagrees with the ordinary one you are watching the giants against everyone else.

Around the world

FTSE 100 (UK), DAX 40 (Germany), CAC 40 (France), Nikkei 225 (Japan, from the price-based tradition), Hang Seng (Hong Kong), plus world aggregates like MSCI World that bundle dozens of countries into one line. Same grammar everywhere: a list, a weighting, a number — now you can read any of them.

Beyond stocks

Indices measure nearly everything: bonds (aggregate bond indices), commodities, volatility (the VIX you met in Course 1), even strategies. Wherever money needs a benchmark, someone built a stick.

Why benchmarks rule the industry

"Did my fund do well?" is unanswerable without "compared to what?" The index provides the what. Course 1's uncomfortable fact — most active funds lagging their index after fees — is precisely a benchmark statement. Behind the scenes, benchmark choice quietly steers trillions: whatever the stick measures, the industry optimizes.

Try it now

Three slices of the same market over the same month. Broad:

Concentrated in the largest technology names:

And small companies:

1. Line the three up and find a day where they disagree — one up while another is down, or one moving twice as far. What does that disagreement say about big technology against the rest of the market?
2. Measure all three across the identical window and write the three percentages in a column. Eyeballing three charts with three different vertical scales is exactly how people convince themselves of things that are not there.
3. Switch each to its 1Y range and do it again. A month and a year can tell opposite stories about which slice is leading.
4. Find your own country's flagship index and its weighting method — is it weighted by company size, by share price, or equally? The method decides which companies get a vote. Next headline you hear, catch WHICH index is quoted — you will never hear "the market" the same way again.