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June 28, 2013     Post-Gazette
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Page 8 POST-GAZETTE, JUNE 28, 2013 : ~ ~IIl ~ ~/~f~% ili~iii~i~ii!i !i i~i ~ ~i~i~iiiiii!i!~iiiZiiiii~i~i~i~i~iiiiiiiiiii!i~i~i~i~?!i!i!~ii~i~!~:!i~!ii!!Zi ::iii ~ i~!!:~i~ir~ .................. UNDERSTANDING THE MARKETS What the Acronyms Signify and what Affects Investors Dow. NASDAQ. S&P 500. Fear index. NYSE. Commod- ity prices. Earnings. Eco- nomic indicators. These are the gauges and signposts of investing, but if you stopped most people on the street, you'll find they have only a hazy understanding of what these terms signify or refer- ence. If you've ever been left dizzy by the jargon of the financial world, here is a brief article to help clarify some of the arcane topics. Let's start on Wall Street. The major U.S. indices. The Dow Jones Industrial Average tracks how 30 pub- licly owned companies trade on a market day -- the "blue chips", 30 titans of U.S. and global business chosen by the Wall Street Journal, most not actually industrial. The NASDAQ Composite records the performance of 3,000+ companies on the NASDAQ Stock Market (see below), including many technology firms. The S&P 500 logs the performance of 500 lead- ing publicly traded compa- nies across ten different sectors (business/industry categories), as determined by financial research giant Standard & Poor's (there was actually a Mr. Poor, hence the name),n~ At the end of the trading day, these indices settle or "close" at a price level. The Dow is a price-weighted index -- that is, its value each trading day rides up or down on the price move- ments of its 30 components. By contrast, the S&P 500 and NASDAQ (and most other stock indices) are cap- weighted, meaning the index value reflects the to- tal market value of the com- panies in the index and not simply the prices of indi- vidual components. The S&P 500 has both a price return and a total return (the total return includes dividends),n~ While the nightly news tells everyone what the Dow did today, many seasoned investors pay more attention to the S&P 500, which rep- resents about 70% of the value of the U.S. stock mar- ket. There are other indices that also grab Wall Street's attention. Investors watch the Russell 2000 (which lists the "small caps", usually newer and younger firms than found in the predomi- nantly "large-cap" S&P 500) and the Wilshire 5000, which tracks stocks of almost every publicly owned company in America (6,000+ components). Eyes are also on the "fear index", the CBOE VIX (Chicago Board Options Exchange Volatility Index), which measures investors' expectations of volatility (read: market risk) in the S&P 500 for the next 30 days. Important multina- tional indices (the MSCI World and Emerging Markets indices, the Global Dow, the S&P Global 100, and many more) and foreign indices (Japan's Nikkei 225, Ger- many's DAX, China's Shang- hai Composite and many others) also get a look.2,3,4,5 The stock exchanges. Stocks trade on exchanges, with the most prominent in America being the New York Stock Exchange (NYSE), the "big board" at which celebri- ties are seen ringing the opening or closing bell. Other notable U.S. stock and securities markets include the American Stock Exchange (AMEX), the CBOE and the NASDAQ Stock Mar- ket. While the NYSE trading day runs from 9:30am- 4:00pm EST, pre-market and after-hours trading also occurs as investors respond to earnings announced after or before the bell or overseas developments. The NYMEX, the COMEX & the forex market. The , ' TION FACILITY7 Specializing in the art of celebration Wedding, Anniversary, Quincea~era, Reunion, Birthday, Social and Corporate Events. Convenient location and valet parking makes Spinelli's East Boston the perfect location. We are dedicated to the highest level of service and professionalism to ensure the success of your special occasion. CME Group of Chicago owns and operates the New York Mercantile Exchange (NYMEX), the biggest physi- cal commodities exchange on the planet. The NYMEX tracks energy futures such as oil and natural gas and it also has a COMEX division for metals such as gold, sil- ver and copper futures. (Platinum and palladium futures actually trade on the NYMEX instead of the COMEX.) Agricultural com- modity futures and options are traded on the CME Group's Chicago Mercantile Exchange. Over-the-counter currency trading occurs via the worldwide, decentralized forex (foreign exchange) market. Short-term move- ments in exchange rates do influence stocks. 6.7 The bond market. Further decentralized trading occurs here, conducted by institu- tional and individual inves- tors, governments and trad- ers buying, selling and issu- ing government, corporate and mortgage-linked securi- ties (and other varieties). Bond prices fall when bond yields rise, and vice versa. Interest rate changes affect the bond market more than any other factor; credit rat- ing adjustments and changes in the appetite for risk (i.e., a race to or retreat from stocks by investors) can also play roles. What moves the markets up and down? Information - or more precisely, the way large institutional investors respond to it. Things really move when the equilibrium of the market is upset by either positive or negative breaking news -- it could be a geopolitical develop- ment, a natural disaster, a central bank decision, a comment from a Federal Reserve official or the Trea- sury Secretary, it could be many things. It could be earnings reports -- corporate earnings are sometimes called the "mother's milk" of stocks, and when two or three big companies beat estimates, Wall Street may see big gains that day. The markets also respond to an ongoing stream of eco- nomic news releases from the federal government and other organizations. Federal Reserve policy announce- ments (interest rate adjust- ments, the implementation or cessation of stimulus efforts) get the most atten- tion, and the Labor Depart- ment's monthly employment report finishes second. Other critical monthly releases in- clude the Commerce Depart- ment's consumer spending report, the Bureau of Labor Statistics Consumer Price Index measuring consumer inflation and monthly re- ports on existing home sales (from the National Associa- tion of Realtors), new home sales (from the Census Bureau) and home values ...... (Contizmed, on Page ,1~) 4th of In and Around Boston JUNE 29 Braintree i0:00 PM -- Braintree High School Brockton I0:00 PM -- Brockton Fairgrounds Chieopee 9:30 PM --Szot Park Easthampton 9:30 PM -- White Brook Middle School Hingham 9:15 PM -- Button Island Ipswich 9:00 PM -- Turner Hill Golf Club Lowell 9:30 PM -- 450 Aiken Street Salisbury 10:15 PM -- Barge off Salisbury Beach South Yarmouth 8:30 PM -- Dennis-Yarmouth High School Spencer 9:30 PM -- Zukas Hilltop Barn JUNE 30 Brockton 10:00 PM -- Brockton Fairgrounds Holliston 9:00 PM -- Holliston High School Mashpee 9:00 PM -- Willowbend CC Golf Course JULY 1 Lynn 9:00 PM -- Fraser Field Mashpee 9:30 PM -- Mashpee High School JULY 3 Andover 9:20 PM -- Andover High School Auburn 9:15 PM -- Pappas Recreation Complex Brockton 10:00 PM -- Brockton Fairgrounds Danvers 9:30 PM -- Plains Park Foxborough 9:30 PM -- Patriot Place parking lot E. 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Reading Dusk -- Ipswich River Park Pittsfield 9:30 PM -- Wahconah Park Provincetown 9:00 PM -- Barge off McMillian Wharf Salem 9:00 PM -- Derby wharf Salisbury 10:15 PM -- Barge off Salisbury Beach Sturbridge 6:00PM -- Old Sturbridge Village Wakefield 9:00 PM -- End of Beacon Street Wilmington 9:00 PM -- Wilmington High Field ~inthr~p 9:00 PM.~-~- .Winthrop_Bay