CHAPTER 3 “The Dow Jones Industrial Average added points to 10,, bolstered by a percent gain in component Intel,” The Wall Street Journal reported on November 11, 2004. The Journal also reported that Intel gains helped boost the Nasdaq Composite Index, but oil futures were on the decline again.” | The Equity Markets CHAPTER 3 The Dow Jones Industrial Average added points to 10 bolstered by a percent gain in component Intel The Wall Street Journal reported on November 11 2004. The Journal also reported that Intel gains helped boost the Nasdaq Composite Index but oil futures were on the decline again. If you are new to the financial industry you may be wondering exactly what all of these headlines mean and how to interpret them. The next two chapters are intended to provide a quick overview of the financial markets and what drives them and introduce you to some market lingo as well. For reference many definitions and explanations of many common types of securities can be found in the glossary at the end of this guide. Bears vs. Bulls Almost everyone loves a bull market and an investor seemingly cannot go wrong when the market continues to reach new highs. At Goldman Sachs a bull market is said to occur when stocks exhibit expanding multiples - we will give you a simpler definition. Essentially a bull market occurs when stock prices as measured by an index like the Dow Jones Industrial or the S P 500 move up. A bear market occurs when stocks fall. Simple. More specifically bear markets generally occur when the market has fallen by greater than 20 percent from its highs and a correction occurs when the market has fallen by more than 10 percent but less than 20 percent. The most widely publicized most widely traded and most widely tracked stock index in the world is the Dow Jones Industrial Average. The Dow was created in 1896 as a yardstick to measure the performance of the . stock market in general. Initially composed of only 12 stocks the Dow began trading at a mere 41 points. Today the Dow is made up of 30 large companies in a variety of industries and is measured in the thousands of points. In November 1999 the Dow Jones updated its composite adding and removing companies to better reflect the current economy. Union Carbide Goodyear Tire
