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    How to read the stock market: what indexes like the S&P 500 measure

    A stock index tracks a basket of shares to represent a market. The S&P 500 follows 500 large US companies, weighted by market value, while the Dow follows 30 stocks weighted by share price.[1][2][3] "The market" in news reports usually means these indexes. A move is best read as a percentage change from a dated close, such as the S&P 500's 7,811.54 on October 9, 2026.[4]

    Editor reviewedStrict sourcingUpdated Markets and trading

    When a news report says “stocks rose today,” it almost always means a stock index such as the S&P 500 went up.[5] This guide explains what indexes measure and how to read the numbers. It is the start of a short course on US markets and the Federal Reserve. It is not financial advice.

    What an index is

    A stock index is a scorecard for a group of shares. It tracks a “basket” of stocks chosen to represent a market or a part of one. You cannot buy an index itself, but index funds copy it.[1]

    The best-known US index is the s-and-p-500. It tracks 500 large companies listed on the New York Stock Exchange or Nasdaq.[5] Bigger companies count for more, so a move in one giant company can lift or drag the whole index.[2]

    The S&P 500 is a float-adjusted market-capitalization-weighted index. Its level equals the total float-adjusted market value of its members divided by a divisor.[2] Members must meet eligibility rules. An April 2026 SEC filing gives a minimum company-level market capitalization of $20.5 billion. The index is measured against a 1941-43 base period.[6]

    The Dow Jones Industrial Average is price-weighted. It holds 30 stocks picked by a committee, and a high-priced share carries more weight regardless of company size.[3] As a result, the two indexes can move by different percentages on the same day.

    How to read a market move

    Look at the percentage change, not just the points. On October 6, 2026 the S&P 500 closed at a record 7,818.93.[7] A 78-point move from that level is about 1%. The same number of points meant more when the index was lower.

    Always check the date. Index levels change every trading day. Our pages give a “close” with its date, such as 7,811.54 on October 9, 2026.[4]

    Percentage changes should be computed from closing values. The headline S&P 500 is a price index and excludes dividends. A separate total return index includes them, which matters for long-run comparisons.[8] A drawdown is measured from a prior closing peak. In 2026 the S&P 500’s largest drawdown ran from 6,978.60 on January 27 to 6,343.72 on March 30, about 9.1%.[9][10]

    Records, sell-offs and market labels

    • Record close. The highest closing level ever. The S&P 500’s latest record was 7,818.93 on October 6, 2026.[7]
    • Sell-off. A sharp fall over a day or a few days. On June 5, 2026 the S&P 500 fell about 2.6%, its worst day since October 2025.[11]
    • Bear and bull markets. The SEC’s Investor.gov says a bear market generally means a fall of 20% or more in a broad index over at least two months. A bull market is a rise of 20% or more over at least two months.[12]

    What moves the market

    Company profits matter a great deal. In September 2026 the New York Fed’s markets desk said that year’s stock gains came entirely from strong actual and expected earnings.[13] News can also move markets fast. When a ceasefire in the Iran war was announced on April 8, 2026, the S&P 500 jumped more than 2% in a day.[14]

    The Federal Reserve notes that changes in interest rates affect stock prices by changing the relative attractiveness of equities.[15] In 2026, rising earnings expectations outweighed higher yields. The desk reported that price-to-earnings multiples declined even as the index rose.[13] The 10-year Treasury yield climbed from 4.19% to 5.31% between January 2 and October 5.[16]

    Where to go next

    The S&P 500 page covers the index in depth, and the 2026 market tracker has the dated record. Interest rates also move stock prices.[15] So the course continues with how Fed rate hikes and cuts affect markets.

    Questions readers ask

    What does "the stock market" mean in the news?

    Usually the level of a major index such as the S&P 500, which tracks 500 large US companies and is regarded as a gauge of the large-cap US market.[5]

    What is the difference between the S&P 500 and the Dow?

    The S&P 500 holds 500 large companies weighted by float-adjusted market value. The Dow Jones Industrial Average holds 30 stocks chosen by a committee and is weighted by share price.[2][3]

    What is a bear market?

    The SEC's Investor.gov says a bear market generally occurs when a broad index falls 20% or more over at least two months. A bull market is a 20% rise over at least two months.[12]

    Can you invest in an index?

    Not directly. Index funds track an index and offer indirect exposure, with the same general risks as the securities in the index.[1][17]

    Why do interest rates move stock prices?

    The Federal Reserve says rate changes alter how attractive stocks are relative to other investments, which affects stock prices and household wealth.[15]

    Sources

    Each numbered claim is a statement we checked against the sources listed with it. Status shows how well established it is.

    1. [1]

      A market index measures a basket of securities; investors cannot buy an index directly but can hold index funds that track one. confirmedas of 2026-10-10

      • Index Funds · U.S. Securities and Exchange Commission (Investor.gov) (retrieved 2026-10-10)
    2. [2]

      The S&P 500 is weighted by float-adjusted market capitalization, so larger companies move the index more; its level is total float-adjusted market value divided by a divisor. confirmedas of 2026-10-10

    3. [3]

      The Dow Jones Industrial Average is a price-weighted index of 30 stocks chosen by a committee, also published by S&P Dow Jones Indices. confirmedas of 2026-04-08

    4. [4]

      The S&P 500 closed at 7,811.54 on October 9, 2026. confirmedas of 2026-10-09

    5. [5]

      The S&P 500 tracks 500 large US companies listed on the NYSE or Nasdaq and is regarded as a gauge of the large-cap US equity market. confirmedas of 2026-10-10

    6. [6]

      As described in an April 2026 SEC filing, S&P 500 components must have a company-level market capitalization of at least $20.5 billion, and the index is measured against a 1941-43 base period. confirmedas of 2026-04-08

    7. [7]

      On October 6, 2026 the S&P 500 set a record close of 7,818.93, its first close above 7,800, and a record intraday high of 7,844.52, while the 10-year Treasury yield eased to 5.27% from 5.31%. confirmedas of 2026-10-06

    8. [8]

      The headline S&P 500 level is a price index of daily closing values and does not include dividends. confirmedas of 2026-10-10

    9. [9]

      The S&P 500 closed at 6,978.60 on January 27, 2026, its highest close before the Iran-war sell-off; CNN described its peak as late January. confirmedas of 2026-03-27

    10. [10]

      The S&P 500's lowest close of 2026 through October 9 was 6,343.72 on March 30, about 9.1% below the January 27 close. confirmedas of 2026-10-09

    11. [11]

      On June 5, 2026 the S&P 500 fell about 2.6%, its worst day since October 2025, as technology stocks sold off and a stronger-than-expected May jobs report (172,000 jobs) raised expectations of a Fed rate hike. confirmedas of 2026-06-05

    12. [12]

      The SEC's Investor.gov says a bear market generally means a broad index falling 20% or more over at least two months, and a bull market a rise of 20% or more over at least two months. confirmedas of 2026-10-10

    13. [13]

      The New York Fed's markets desk told the FOMC in September 2026 that the year's rise in equity prices was entirely due to strong actual and expected earnings, while price-to-earnings multiples had declined. confirmedas of 2026-09-16

    14. [14]

      On April 8, 2026, after President Trump agreed to a two-week pause in attacks on Iran, the S&P 500 rose more than 2% to 6,782.81 and US crude futures fell about 16.5%. confirmedas of 2026-04-08

    15. [15]

      The Fed says changes in interest rates tend to affect stock prices by changing how attractive equities are relative to other investments, and also move house prices and the dollar. confirmedas of 2026-10-10

    16. [16]

      The 10-year Treasury par yield rose from 4.19% on January 2, 2026 to 5.31% on October 5 and stood at 5.24% on October 9. confirmedas of 2026-10-09

    17. [17]

      Index funds generally follow a passive strategy, which may lower costs, but they carry the same general risks as the securities in the index they track. confirmedas of 2026-10-10

      • Index Funds · U.S. Securities and Exchange Commission (Investor.gov) (retrieved 2026-10-10)
      • Index Funds · U.S. Securities and Exchange Commission (Investor.gov) (retrieved 2026-10-10)
    Revision history (1)
    1. Page created.

    Created Oct 10, 2026. Last reviewed by an editor on Oct 10, 2026. Next scheduled review: Jan 10, 2027.

    Cite this page

    "How to read the stock market: what indexes like the S&P 500 measure." ContentLora, updated Oct 10, 2026. https://contentlora.com/explain/how-stock-market-indexes-work

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