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Understanding the Stock Market: Brokers, Exchanges, and Indexes

Learn how stock brokers and stock exchanges facilitate the buying and selling of stocks, and how stock indexes can be used to evaluate the performance of the stock market. Explore the New York Stock Exchange (NYSE) and NASDAQ, the largest stock exchanges in the US. Understand the concepts of bull and bear markets, and discover the significance of stock indexes like the Dow Jones Industrial Average and the S&P 500. Finally, explore how changes in the stock market reflect the changing economy.

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Understanding the Stock Market: Brokers, Exchanges, and Indexes

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  1. Video Clip Why do so many Americans worry when the stock market takes a dip?

  2. Lesson 3.3The Stock Market Essential Questions: How do stock brokers and stock exchanges facilitate the sale of stocks? How can stock indexes be used to evaluate the performance of the stock market?

  3. “What Makes Us Tick” (1952) Presented by the New York Stock Exchange Video • Questions: • Why do businesses sell stocks? • Why do individuals buy stocks? • How does stock ownership benefit the overall U.S. economy?

  4. How do stock brokers and stock exchanges facilitate the buying and selling of stocks? A stock exchange is a place where buyers and sellers of stock can come together to trade. There are exchanges in NYC, Philadelphia, Boston, and other cities. A stock broker buys and sells stocks on behalf of his/her clients in return for a fee or commission Video Clip

  5. The New York Stock Exchange (NYSE) • The world’s largest stock exchange (based on market capitalization of listed companies) • Market Hours from 9:30 a.m. to 4:00 p.m. Monday through Friday • The stocks of over 3,000 companies are listed/traded • Approximately 1,400 “seats” which are purchased by brokerage firms (Merrill Lynch, Legg Mason, Morgan Stanley, etc.) who buy & sell on behalf of their clients http://www.nyse.com/

  6. NASDAQ (National Association of Securities Dealers Automated Quotations) • The largest electronic screen-based securities trading market in the United States • Market Hours from 9:30 a.m. to 4:00 p.m. Monday through Friday • Approximately 3,700 companies listed • Generally, lists newer “technology” stocks when compared to the NYSE (Microsoft, Google, Facebook, Intel, etc.) http://www.nasdaq.com/

  7. What is a Bull Market? A market in which stock prices are rising. It is characterized by optimism, investor confidence and expectations that prices will continue to rise. Those optimists are called “bulls”. What is a Bear Market? A market in which stock prices are falling. It is characterized by pessimism and expectations that prices will continue to fall. Those pessimists are called “bears”.

  8. What is a stock index? Stock Index – a statistical indicator used in measurement and reporting of changes in the market value of a group of stocks/shares.

  9. Notable Market Indexes • Dow Jones Industrial Average – Index that tracks the prices of 30 of the largest and most widely held public companies in the U.S. https://finance.google.com/finance?q=INDEXDJX%3A.DJI&ei=uLSdWpHlIsqWeuOomOgP • Standard & Poor’s 500 – Index that tracks the prices of 500 U.S. Corporations https://finance.google.com/finance?q=INDEXSP%3A.INX&ei=0LSdWsneLMG_esSEkKAC • NASDAQ Composite – Main index that tracks the trends of NASDAQ stocks https://finance.google.com/finance?q=INDEXNASDAQ%3A.IXIC&ei=ELWdWpGvNIXIecbWucgB

  10. Dow 30 adds Goldman Sachs, Nike and Visa • Which stocks were added to the DJIA? Which ones did they replace? Why? • How do the changes that have been made to the DJIA since 1999 reflect the changing U.S. economy?

  11. Lesson 3.3 The Stock MarketSummarizer: Explain the importance of stocks and the stock market in a capitalist system. Respond in 4 to 6 lines

  12. Selling stocks allows businesses to raise large amounts of financial capital and grow into large corporations, creating lots of jobs and producing products efficiently so they can be sold at a lower price • The buying and selling of stocks allows people to invest and earn a profit

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