The The Stock Stock MarketMarket

Markets & Markets & IndicatorsIndicators

Bull Vs. Bear Bull Vs. Bear MarketMarket

Bull Bull MarketMarket – – Market is Market is doing well! doing well! People are People are optimistic optimistic and buying and buying stocks!stocks!Bear MarketBear Market – – Market is NOT doing Market is NOT doing well. People are not as optimistic, and well. People are not as optimistic, and are NOT buying stocks.are NOT buying stocks.

Where is the Where is the Stock?Stock?

Stock ExchangesStock Exchanges• A central place where traders A central place where traders

meet to buy and sell stock.meet to buy and sell stock. People talk to their stockbroker, People talk to their stockbroker,

and he will contact his and he will contact his representative on the exchange representative on the exchange floorfloor

Auction-like atmosphereAuction-like atmosphere

Stock ExchangesStock Exchanges1.1. New York Stock Exchange New York Stock Exchange

(NYSE)(NYSE) Oldest & LargestOldest & Largest 2,800 Companies2,800 Companies Average Price = $33.00Average Price = $33.00

2.2. American Stock ExchangeAmerican Stock Exchange 22ndnd Largest Largest Not as strict as NYSE – Smaller Not as strict as NYSE – Smaller

CompaniesCompanies Average Price = $24.00Average Price = $24.00

Stock ExchangesStock Exchanges3.3. NASDAQNASDAQ (National Association of (National Association of

Securities Dealers Automated Securities Dealers Automated Quotations)Quotations)

Stocks traded in an electronic marketStocks traded in an electronic market 4,000 Companies4,000 Companies More Risky because stocks are very More Risky because stocks are very

newnew Average Price = $11.00Average Price = $11.00

Market Market IndicatorsIndicators1.1.Dow Jones Industrial Average Dow Jones Industrial Average “The “The Dow”Dow”

““The Dow”The Dow” 30 Leading Industrial Blue-Chip Stocks30 Leading Industrial Blue-Chip Stocks

2.2.Standard & Poor’s Composite IndexStandard & Poor’s Composite Index ““S&P 500”S&P 500” Covers Market Activity for 500 of the most Covers Market Activity for 500 of the most

successful stockssuccessful stocks

3.3.NASDAQNASDAQ Monitors fast-moving technology stocksMonitors fast-moving technology stocks Dramatic ups and downsDramatic ups and downs

The The Stock Stock MarketMarket

Earnings Earnings & Types & Types of Stockof Stock

““Return” on Return” on StocksStocks

““YieldYield” = ” = the amount of money an the amount of money an investment earns.investment earns.

2 Types of Returns:2 Types of Returns:

1.1. DividendsDividends – – A share of profits that a A share of profits that a company distributes to its company distributes to its shareholders.shareholders.

2.2. Capital GainsCapital Gains – – Selling stock for Selling stock for more than you paid for it.more than you paid for it.

• ““Capital LossCapital Loss” = selling stock for ” = selling stock for lessless than you paid for it.than you paid for it.

The Rate of Return The Rate of Return . . . . . . How much money are you making How much money are you making

off of this investment?off of this investment? Always expressed as a percent of Always expressed as a percent of

the original investment, figured the original investment, figured annuallyannually

ExEx: 1 share of stock goes from $50 to : 1 share of stock goes from $50 to $55 in 1 year and pays a $5 dividend.$55 in 1 year and pays a $5 dividend. How much did your stock yield?How much did your stock yield? What is your rate of return?What is your rate of return?

Yield ÷ Original PriceYield ÷ Original Price

$10$10

20%20%

Types of StockTypes of Stock1.1. Blue-Chip StockBlue-Chip Stock

Very safe stock investmentVery safe stock investment Strongest, Largest, Long-standing Strongest, Largest, Long-standing

CompaniesCompanies IBM, Wal-Mart, Coca-ColaIBM, Wal-Mart, Coca-Cola

2.2. Income StockIncome Stock Stock that regularly pays high dividendsStock that regularly pays high dividends Stock price tends to remain steadyStock price tends to remain steady Gas and Electric CompaniesGas and Electric Companies

Types of StockTypes of Stock3.3. Speculative “Penny” StockSpeculative “Penny” Stock

Stock issued by new companiesStock issued by new companies Usually priced at less than $1 per shareUsually priced at less than $1 per share Price can go up and down wildlyPrice can go up and down wildly Very risky investmentVery risky investment

4.4. Growth StockGrowth Stock Stock in companies who are rapidly growingStock in companies who are rapidly growing Stock price will steadily growStock price will steadily grow Rarely pay dividendsRarely pay dividends

Types of StockTypes of Stock5.5. Cyclical StockCyclical Stock

Stocks that move with the economyStocks that move with the economy Economy goes up, Cyclical stock goes upEconomy goes up, Cyclical stock goes up Good to purchase when market is lowGood to purchase when market is low

6.6. Defensive StockDefensive Stock Stock that remains stable during Stock that remains stable during

declines in the economydeclines in the economy Companies still able to issue dividendsCompanies still able to issue dividends Many Blue-Chip and Income StocksMany Blue-Chip and Income Stocks

Types of StockTypes of Stock7.7. Large-Cap and Small-Cap StockLarge-Cap and Small-Cap Stock

Large-CapLarge-Cap - Companies that issue a - Companies that issue a

large number of shares of stocklarge number of shares of stock Considered a safe investmentConsidered a safe investment

Small-CapSmall-Cap – Companies that issue a – Companies that issue a

small number of shares of stocksmall number of shares of stock Considered a more risky investment, Considered a more risky investment,

because they are smaller companiesbecause they are smaller companies