Nasdaq Composite
Encyclopedia
The Nasdaq Composite is a stock market index
of the common stock
s and similar securities (e.g. ADR
s, tracking stock
s, limited partnership
interests) listed on the NASDAQ
stock market, meaning that it has over 3,000 components. It is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies. Since both U.S. and non-U.S. companies are listed on the NASDAQ stock market, the index is not exclusively a U.S. index.
burst.
The index declined to half its value within a year, and finally hit the bottom of the bear market trend
on October 10, 2002 with an intra-day low of 1,108.49. While the index gradually recovered since then, it did not trade for more than half of its peak value until May 2007. The 2000s brought a mix of pessimistic news stemming from the Early 2000s recession
, the September 11 attacks and the impending Afghan War
along with the 2003 invasion of Iraq
.
ary readings; closing above the 2,800 point mark on October 9, 2007. The intraday level of 2,861.51 on October 31, 2007 was the highest point reached on the index since January 24, 2001.
While increased anxiety over high energy prices and the possibility of recession dropped the NASDAQ well into correction territory in early 2008, a bear market was finally recognized on February 6 when the NASDAQ closed below the 2,300 level, about 20% below the recent highs. On September 29, 2008, the NASDAQ dropped nearly 200 points, the most since the tech bubble burst, losing 9.14% (third largest in history) to fall beneath the 2,000 level. On October 13, 2008, the NASDAQ recorded a gain of nearly 200 points (more than 11%), continuing record levels of market volatility.
Extending a two-month slide, the index recorded fresh 5½-year lows on November 20, 2008, closing at 1,316.12 near its intraday low, almost 55% below its cyclical bull market peak. On March 9, 2009, the composite hit an intra-day low of 1,265.52 extending losses surrounding the financial crisis which began in late 2008.
Towards the beginning of December 2010, the composite made a staggering 101% rebound from its March lows towards the 2,550 level, amid hope that the Late-2000s Recession, the United States housing bubble
and the Global financial crisis of 2008–2009 were easing and possibly coming to an end. However it still ended the decade considerably below where it started the decade. Since its inception, the index has grown to include over 3,000 companies.
- American Depositary Receipts (ADRs)
- Common Stock
- Limited Partnership Interests
- Ordinary Shares
- Real Estate Investment Trusts (REITs)
- Shares of Beneficial Interest (SBIs)
- Tracking Stocks
Closed-end funds, convertible debentures, exchange traded funds, preferred stocks, rights, warrants, units and other derivative securities are not included. If at any time a component security no longer meets the above criteria, the security becomes ineligible for inclusion in the Composite Index and is removed.
issued by fund manager Fidelity Investments. Introduced on October 1, 2003, the ETF attempts to match the overall performance of the index. It is not nearly as popular as the "cubes" which track the NASDAQ-100
.
Stock market index
A stock market index is a method of measuring a section of the stock market. Many indices are cited by news or financial services firms and are used as benchmarks, to measure the performance of portfolios such as mutual funds....
of the common stock
Common stock
Common stock is a form of corporate equity ownership, a type of security. It is called "common" to distinguish it from preferred stock. In the event of bankruptcy, common stock investors receive their funds after preferred stock holders, bondholders, creditors, etc...
s and similar securities (e.g. ADR
American Depositary Receipt
An American depositary receipt is a negotiable security that represents the underlying securities of a non-U.S. company that trades in the US financial markets...
s, tracking stock
Tracking stock
Tracking stock or targeted stock are specialized equity offerings issued by a company that is based on the operations of a wholly owned subsidiary of a diversified firm. Therefore, the tracking stock will be traded at a price related to the operations of the specific division of the company being...
s, limited partnership
Limited partnership
A limited partnership is a form of partnership similar to a general partnership, except that in addition to one or more general partners , there are one or more limited partners . It is a partnership in which only one partner is required to be a general partner.The GPs are, in all major respects,...
interests) listed on the NASDAQ
NASDAQ
The NASDAQ Stock Market, also known as the NASDAQ, is an American stock exchange. "NASDAQ" originally stood for "National Association of Securities Dealers Automated Quotations". It is the second-largest stock exchange by market capitalization in the world, after the New York Stock Exchange. As of...
stock market, meaning that it has over 3,000 components. It is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies. Since both U.S. and non-U.S. companies are listed on the NASDAQ stock market, the index is not exclusively a U.S. index.
Dot com boom
On July 17, 1995, the index closed above the 1,000 mark for the first time. On March 10, 2000, the index peaked at an intra-day high of 5,132.52, and closed at an all-time high of 5,048.62. The decline from this peak signaled the beginning of the dot-com bubbleDot-com bubble
The dot-com bubble was a speculative bubble covering roughly 1995–2000 during which stock markets in industrialized nations saw their equity value rise rapidly from growth in the more...
burst.
The index declined to half its value within a year, and finally hit the bottom of the bear market trend
Market trend
A market trend is a putative tendency of a financial market to move in a particular direction over time. These trends are classified as secular for long time frames, primary for medium time frames, and secondary for short time frames...
on October 10, 2002 with an intra-day low of 1,108.49. While the index gradually recovered since then, it did not trade for more than half of its peak value until May 2007. The 2000s brought a mix of pessimistic news stemming from the Early 2000s recession
Early 2000s recession
The early 2000s recession was a decline in economic activity which occurred mainly in developed countries. The recession affected the European Union mostly during 2000 and 2001 and the United States mostly in 2002 and 2003. The UK, Canada and Australia avoided the recession for the most part, while...
, the September 11 attacks and the impending Afghan War
War in Afghanistan (2001–present)
The War in Afghanistan began on October 7, 2001, as the armed forces of the United States of America, the United Kingdom, Australia, and the Afghan United Front launched Operation Enduring Freedom...
along with the 2003 invasion of Iraq
2003 invasion of Iraq
The 2003 invasion of Iraq , was the start of the conflict known as the Iraq War, or Operation Iraqi Freedom, in which a combined force of troops from the United States, the United Kingdom, Australia and Poland invaded Iraq and toppled the regime of Saddam Hussein in 21 days of major combat operations...
.
Financial crisis
The index opened the fourth quarter of 2007 with new 80-month highs, fueled by future possible takeovers and mergers, healthy earnings reports particularly in the tech sector, and moderate inflationInflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
ary readings; closing above the 2,800 point mark on October 9, 2007. The intraday level of 2,861.51 on October 31, 2007 was the highest point reached on the index since January 24, 2001.
While increased anxiety over high energy prices and the possibility of recession dropped the NASDAQ well into correction territory in early 2008, a bear market was finally recognized on February 6 when the NASDAQ closed below the 2,300 level, about 20% below the recent highs. On September 29, 2008, the NASDAQ dropped nearly 200 points, the most since the tech bubble burst, losing 9.14% (third largest in history) to fall beneath the 2,000 level. On October 13, 2008, the NASDAQ recorded a gain of nearly 200 points (more than 11%), continuing record levels of market volatility.
Extending a two-month slide, the index recorded fresh 5½-year lows on November 20, 2008, closing at 1,316.12 near its intraday low, almost 55% below its cyclical bull market peak. On March 9, 2009, the composite hit an intra-day low of 1,265.52 extending losses surrounding the financial crisis which began in late 2008.
Towards the beginning of December 2010, the composite made a staggering 101% rebound from its March lows towards the 2,550 level, amid hope that the Late-2000s Recession, the United States housing bubble
United States housing bubble
The United States housing bubble is an economic bubble affecting many parts of the United States housing market in over half of American states. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and may not yet have hit bottom as of 2011. On December 30, 2008 the...
and the Global financial crisis of 2008–2009 were easing and possibly coming to an end. However it still ended the decade considerably below where it started the decade. Since its inception, the index has grown to include over 3,000 companies.
Criteria
To be eligible for inclusion in the Composite, a security's U.S. listing must be exclusively on the NASDAQ Stock Market (unless the security was dually listed on another U.S. market prior to 2004 and has continuously maintained such listing), and have a security type of either:- American Depositary Receipts (ADRs)
- Common Stock
- Limited Partnership Interests
- Ordinary Shares
- Real Estate Investment Trusts (REITs)
- Shares of Beneficial Interest (SBIs)
- Tracking Stocks
Closed-end funds, convertible debentures, exchange traded funds, preferred stocks, rights, warrants, units and other derivative securities are not included. If at any time a component security no longer meets the above criteria, the security becomes ineligible for inclusion in the Composite Index and is removed.
Investing
Investing in the NASDAQ Composite Index is currently made accessible through an exchange-traded fundExchange-traded fund
An exchange-traded fund is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds, and trades close to its net asset value over the course of the trading day. Most ETFs track an index, such as the S&P 500 or MSCI EAFE...
issued by fund manager Fidelity Investments. Introduced on October 1, 2003, the ETF attempts to match the overall performance of the index. It is not nearly as popular as the "cubes" which track the NASDAQ-100
NASDAQ-100
The NASDAQ-100 is a stock market index of 100 of the largest non-financial companies listed on the NASDAQ. It is a modified capitalization-weighted index. The companies' weights in the index are based on their market capitalizations, with certain rules capping the influence of the largest components...
.