The Dow Jones and the S&P 500 set new records on Wall Street. After a few weeks of uncertainty, they recently began a period of rebound in expectation of how the Federal Reserve will try to avoid a recession. Jerome Powell, Chair of the Federal Reserve, even projected interest rate cuts sometime in 2024.
The Dow Jones rose 138 points at Monday's close, marking a 0.4% gain that put the index above 38,000 points for the first time. Meanwhile, the S&P 500 saw a 0.2 % increase and also marked a record high of 4,850.43.
According to The Hill, stocks also recovered due to increased consumer confidence, although tensions in the Middle East could generate fears of an eventual economic slowdown.
What is the Dow Jones?
The Dow Jones and the S&P 500 are part of the family of stock market indexes, in other words, numbers that aggregate the price of the shares of the leading companies in a given sector. The index number in question will represent the average value of the shares of the companies it groups. For example, in the case of Dow Jones, this is the stock market index of the 30 industrial companies with the largest capitalization on the New York Stock Exchange (NYSE).
Therefore, if the index rises, as it did, it means that the companies that comprise it are experiencing gains. Why is this important? Because the Dow Jones groups are the most important companies in the country, an increase means that the leading industrial companies are performing favorably.
If the majority of stocks that make up the Dow Jones index fall in the stock market, the index is likely to fall. Conversely, if the majority of stocks rise, the index is expected to rise. However, because it is a weighted index, not all components have the same weight when making up the final number. For example, if a company represents 5% of the Dow Jones, its rise or fall will have a more significant impact than the share price of a company whose representation is 1%.
The S&P 500 is the country's main stock market index and is considered the most important for measuring the economy's pulse. It is even followed worldwide since its status directly or indirectly affects the rest of the markets.
It includes companies such as Apple, Microsoft, Amazon, Tesla, Alphabet, NVIDIA Corporation, Berkshire Hathaway, Johnson & Johnson, Meta Platforms (formerly Facebook), and many other important international companies.
