Monday, September 27, 2010

What does it mean that Dow Jones Industrial Average is down so many points? Down or up from what reference point?

We hear it from the radio and TV everyday: Dow Jones up 10 points, Dow Jones down 20 points. Most of us know what it means, but when this question came up today I looked up on the web to see if someone was explaining it in simple terms. I did not find a web page giving a satisfactory answer to this simple question. When they say Dow Jones (or NASDAQ or S&P) up or down so many points what reference point they are talking about?
The answer is simple. The reference point is the closure of the market the previous working day.

For example, on Friday, September 24, 2010, the market closed with Dow Jones Industrial Average (DJIA) at 10860.26 points.
Today, September 27, the market closed with Dow Jones at 10834.94 points.
Compared to Friday, the last working day, the market was down. How much was Dow down?

10860.26 - 10834.94= 25.32 points
or, in percentage
=(25.32/10860.26)X100= 0.23%

So, it would be said that the Dow Jones was down 25.32 points, today, or that the market was down 0.23%.

In short, the reference point is always the closure of the market the previous working day, even when these numbers are given middle of the day when the trading is still on.

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