The Dow Jones Industrial Average tracks 30 large US companies and is price-weighted. The S&P 500 tracks about 500 large US companies and is weighted by market capitalisation, so it is the broadest benchmark of the US stock market. The Nasdaq Composite covers most stocks listed on the Nasdaq exchange and leans heavily toward technology, while the Nasdaq-100 holds the 100 largest non-financial Nasdaq companies.
"The market" in US news usually means one of four numbers. They measure different things, which is why they sometimes move in different directions on the same day. Here is what each one is and which to use for what.
The four indices at a glance
| Index | Stocks | Weighting | What it tilts toward |
|---|---|---|---|
| Dow Jones Industrial Average | 30 | Price-weighted | Large, established companies across sectors |
| S&P 500 | About 500 | Market-cap weighted | The broad US large-company market |
| Nasdaq Composite | Thousands listed on Nasdaq | Market-cap weighted | Technology and growth |
| Nasdaq-100 | 100 | Modified market-cap weighted | The largest non-financial Nasdaq companies |
Dow Jones Industrial Average
The Dow is the oldest of the group. It holds just 30 companies chosen by a committee, not by a formula, and it is price-weighted: a stock with a high share price has more influence than one with a low share price, regardless of the company's size. That is an odd feature, which is why many investors consider it a narrow measure. Its value is mainly as a long-running headline.
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The S&P 500 tracks about 500 large US companies selected by a committee using size, liquidity and profitability rules. It is market-cap weighted, so the biggest companies have the biggest effect. Because it covers a large share of the total value of the US stock market, it is the standard benchmark for professional fund managers and the basis of the most popular index funds.
Nasdaq Composite
This index includes almost every stock listed on the Nasdaq exchange, which is thousands of companies. It is market-cap weighted and is heavy in technology, communication services and biotech. It tends to move more than the S&P 500, up or down, because growth stocks are more volatile.
Nasdaq-100
The Nasdaq-100 holds the 100 largest non-financial companies on the Nasdaq. It is concentrated: a handful of mega-cap tech companies can account for a large share of its value. It is the index behind QQQ and many Nasdaq futures contracts.
Why they diverge
- Tech-heavy days: the Nasdaq indices react strongly to technology news, while the Dow reacts less.
- A rotation into value or defensive stocks: the Dow can outperform when tech falls.
- Different weighting: a big move in one high-priced Dow stock can move the Dow while the S&P 500 barely changes.
Which one should you use?
- To judge "the US market": the S&P 500.
- To judge tech and growth: the Nasdaq-100 or Composite.
- As a daily headline: the Dow, with the caveat that it only has 30 stocks.
Whatever you follow, compare percentage changes, not points. A 300-point move means very different things on the Dow and on the Nasdaq.
How to invest in them
You cannot buy an index directly. You can buy ETFs or index funds that hold the same stocks, or trade index futures and options. See what is futures trading and how futures work. Check fees and tracking error before choosing. See expense ratios and fees.
See the stocks behind the indexes
- Nasdaq stocks today: prices, gainers and losers.
- NYSE stocks today: the same for the New York Stock Exchange.
Live and end-of-day prices on Tradzy Markets cover thousands of US stocks. If you are outside the US, read how to invest in US stocks from outside the US and ADRs and GDRs explained.
FAQ
What is the difference between the S&P 500 and the Dow?
The S&P 500 has about 500 companies weighted by market value. The Dow has 30 companies weighted by share price. The S&P 500 is broader and a better measure of the US market.
Is the Nasdaq the same as the S&P 500?
No. The Nasdaq Composite includes thousands of Nasdaq-listed stocks and leans toward technology. The S&P 500 holds about 500 large companies from all sectors, and some companies are in both.
Which index is best to follow?
For the overall US market, the S&P 500. For technology and growth, the Nasdaq-100.
Why does the Nasdaq move more than the Dow?
It holds more growth and technology stocks, which are more volatile, and a few very large companies carry big weights.
Can I buy the S&P 500?
Not directly. You can buy an index fund or ETF that tracks it, or trade futures and options on it.
Put This Into Practice
- Score your next setup 0–100 with the Void Engine before entering
- Log the trade and tag the setup in the TradLog
- Review weekly: keep what pays, cut what doesn't
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Educational content, not financial advice. Trading involves substantial risk of loss.