Facts

• The Dow Jones Industrial average is the oldest and most widely followed stock market index. The index consists of 30 stocks that Dow Jones describes as "large and well-known U.S. companies." As of mid-2009, the 30 stocks had an average market capitalization of $92.8 billion. The market cap range was $10 billion to $345.5 billion. The component stocks of the Dow Jones Industrial are selected by the editors of the Wall Street Journal.
  The NASDAQ Composite index consists of more than 2,500 stocks traded through the NASDAQ Stock Market. All common equity-type securities in good standing with NASDAQ are included in the index.
  
  

Dow Jones History

• The Dow Jones Industrial Average was introduced by Charles Dow in May 1896. At that time the index consisted of 12 stocks. Of the original 12 only General Electric is still included in the average. During the market crash of the Great Depression from September 1929 until July 1932, the Dow Jones Industrial lost 89 percent of its value. The index lost 35 percent when the dot-com bubble burst in 2000 to 2002. During President Reagan's administration the average gained 121 percent and rose 215 percent during President Clinton's two terms.
  
  

NASDAQ History

• The NASDAQ Composite Index was started in 1971 when the NASDAQ became the world's first electronic stock market. During the 1990s the NASDAQ Composite gained a wide following when the hottest technology stocks where trading on NASDAQ instead of the New York Stock Exchange. During the 1990s the index gained more than 770 percent. The index peaked at just more than 5,000 in March 2000, but then lost 70 percent of its value over the next 18 months.
  
  

Comparison

• The Dow Jones Industrial Average is calculated using a share-price weighting. The most expensive stocks have the highest weighting. As of June 30, 2009, the top five weighted stocks in the index were IBM, ExxonMobil, Chevron, 3M and McDonald's.
  The NASDAQ Composite Index is market cap weighted. Market capitalization is the total value of a companies outstanding stock. In mid-2009 the largest stocks on the NASDAQ were Microsoft, Apple, Cisco Systems, Oracle and Google.
  
  

Significance

• The Dow Jones Industrial Average is the best known market index and is what the major news sources are referring to when they say "the market gained 200 points today." Professional investors and traders are not as interested in the index because it includes only 30 stocks and the share price weighting methodology can give distorted results.
  The NASDAQ Composite is followed by financial professionals for a couple of reasons. The broad market coverage of nearly 3,000 stocks gives an indication of how the stocks of smaller companies are doing as well as the large ones. Many of the newer growth and technology stocks trade exclusively on the NASDAQ exchange and are represented by the Composite Index.