What Does It Mean When the NASDAQ Is Down?

What Does It Mean When the NASDAQ Is Down?
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The Nasdaq is the largest electronic stock exchange in the world, and is one of the major indices of the U.S. stock markets. When people talk about the Nasdaq being down, they are referring to Nasdaq Composite being lower than it has been in recent history. For example, if the Nasdaq is down for the day, that means the composite is lower than it was at the close of trading the previous day. If it's down for the month, that means that the index is lower than it was the previous month.

Difference Between Dow Jones and NASDAQ

Investors watch the Dow Jones Industrial Market to get an idea about how the stock market is performing overall. NASDAQ is an electronic exchange where investors can go to buy and sell stock. Unlike the Dow which tracks stock prices for 30 global leaders in their industries, the NASDAQ tracks the movement of stock prices for the thousands of stocks offered on the NASDAQ exchange. There are no brokers trading on a physical trading floor. All stocks are traded electronically. NASDAQ is a popular market among technology firms. Some of the most notable companies that trade on the NASDAQ include Microsoft, Intel, Cisco Systems, and Apple Inc.

Investing In Stocks

A stock is an investment that gives you a share of ownership in a company. For instance, most companies trading on the NASDAQ offer stocks related to technology and the Internet. Naturally, buying more shares of stock in a company gives you more ownership in the company. If a company makes a profit, as a shareholder, you get a share of the profits. Likewise, if the price of the stock increases, you can make a profit by selling your stock for more money than you paid for it. Stock market prices can fluctuate wildly depending on what types of shares investors are buying and selling. Stock prices often fall quickly when investors want to sell their stock. When this happens, indicators like the Nasdaq can fall as well.

Supply and Demand

A number of different factors affect stock prices. Inflation, company earnings, oil prices and other world events can cause stock values to rise or fall. Owning stocks is not the same thing as having cash in your pocket. When the value of stocks fall, you lose the amount of money that someone is willing to pay for that share of stock. Because stock prices are generally based on supply and demand, prices go up when demand is high. Conversely, greater supply decreases demand thereby lowering stock prices.

Falling Stock Prices

A company’s release of a new product can impact the stock market in different ways. Despite a product’s popularity among consumers, companies that trade on the Nasdaq do not necessarily see stock prices rising. A company’s stock values may actually drop for a time as investors wait to see how well a product does over time. Likewise, oversupply of a product on the market can lower stock prices.