What do daily market ups and downs mean to Capitaland consumers and businesses?

Wikipedia Commons

Trivia question: What is the last remaining original stock tracked by the Dow Jones Industrial Average, from 1896? Answer: Schenectady’s own General Electric. So, when Capital Region residents learn about the ups and downs of the economy in brief snippets on the workings of the Dow, or Nasdaq , there should be a sense of local pride—alongside some confusion about what those terms mean.

The Dow and the Nasdaq are up or down. Up is good, but why and what do the numbers really mean to business owners and consumers? Do we need such frequent reports on such detailed information?

How Now Dow Jones?

• The Dow Jones Industrial Average (the DJIA or more commonly, the “Dow”) is an average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq (see below). The Dow is the oldest and single most watched index in the world. It’s stock quotes include those of Schenectady’s General Electric. Disney, Exxon and Microsoft. When the market is up today, it generally means the Dow.

• Electronic Nasdaq, short for National Association of Securities Dealers Automated Quotation, this computerized system allows trading and offers price quotes on more than 5,000 of the more actively traded over-the-counter stocks—stocks not traded in any physical location, like the New York Stock Exchange. Nasdaq facilitates trading in many high-tech stocks, such as Microsoft, Intel, Dell, and Cisco.

• Prime and discount rates. The U.S. Federal Reserve uses the prime rate as an index for various types of loans such as home equity lines, mortgages and more. The discount rate is the interest rate that banks in the U.S. banking system, or Federal Reserve system, use to make loans to other banks within the system.

These rates and indexes are watched more frequently than ever. Most advisors caution that with savings and investing, time and patience matter most. The Dow, for instance, has averaged nine percent—over 80 years—even through the Great Depression and the crash of 2008. It helps, therefore, to take hourly or daily news reports with a little grain of salt.

Contact Dave Balog at dbalog99@gmail.com. Ask for a free brochure on money basics.