Understanding Points In The Stock Market
In our last post about understanding the stock market, a visitor named Shirley asked about points in the stock market. In this post I will explain what people who cover or talk about the stock market mean when they refer to “points”
When someone says a stock went up or down 3points today, what they are referring to is that the stock went up or down $3 in value. This is quite different when talking about the DOW (aka: Dow Jones Industrial Average, DJIA), in this case it’s referring to the gage that is used to average out the entire market. Right now the DOW is sitting at around 8500 points, If the DOW falls 100 points, it would mean that it would be around 8400 points.
The second way you will hear someone mention points is when they talk about the Federal Reserve Bank and the interest rate that is charged by them when they lend money to any financial institution. In this case, the value that they put on points (you will also hear it refer to as “basis points”) is much less. 1 point is equal to 1/100th of one percent. Let’s say the interest rate at the moment is 2.5% and you hear on the news that the Federal Reserve Bank lowered the rate by 50 basis points. That would mean that the new interest rate is 2%. This point measurement scale is also used when dealing with bonds and treasury bills.
There a few other ways that the term “points” are used. Many of them would be too much to explain on this site. Basically they refer to some sort of measurement or another within the stock market, including real estate, mortgages and loans.
Tags: basis points, dow jones industrial average, federal reserve, point measurement, points in the stock market, treasury bills, Understanding The Stock MarketRelated posts
A Quick Guide To Understanding The Stock Market
So you want to start learning about the stock market? There are many things about the stock market that you should know in regards to understanding the stock market. That doesn’t mean that they’re hard, you just need to know them if you want to be successful in the stock market. Even if you only study a few different stocks, those stocks are not only effected by their own performance, but can be effected by the market as a whole.
We live in a global economy that is broken up by the different counties and their own as well. America needs the other economies (India, China, UK) to have growth if we want ours to do the same. We couldn’t be able to have positive GDP (Gross Domestic Progress) if the other counties aren’t buying from the U.S. and having it shipped to them.
Within our economy there are different sectors in it. Sectors are categories that the different stocks are listed in. The types of sector are, Airline, Agricultural, Commodities, Energy, Technology and many more then I care to list. Each sector can and will effect each other. You can’t expect the airline industry to do well if the commodity (ie. oil) is going up. If the economy is not doing so well (recession), you won’t see sales doing great in the technology sector.
Political issues will also effect the markets. Many times there are issues like taxes and assistance by the federal government that will help or hurt the market and certain sectors.
There are others things that effect the stock market, some that would take too long to explain in this post and others that would need you to be more advence in you knowledge in the stock markets. Point is, that you should not just study individual stocks without doing your due diligence in the overall markets themselves. Knowledge is power. Learn as much as you can to increase your strength in understanding the stock market
Tags: agricultural commodities, commodity, federal government, global economy, technology sector, Understanding The Stock Market