How are the daily points for NASDAQ or DOW calculated? Can the Nasdaq ever reach a “zero”?

hrsd: How are the daily points for NASDAQ or DOW calculated? Can the Nasdaq ever reach a “zero”?
Every week day (when stock market is open) we hear about the Nasdaq/DOW Industrial either going up or coming dow. How are these points calculated on a realtime basis and what factors contribute to these going up or falling down?
If there is ever a big stock market crash, can these Indices ever fall down to a zero or a negative value?

Answers and Views:

Answer by todd_76705
the dow and nasdaq are indicators of how well the economy or how bad the economy is doing. they are simply economic indicators.

if the market completely crashes, then yes it could go to zero.

there are thirty stocks called blue chip stocks that drive the market. the two i can think of off the top of my head are wal mart and microsoft. they are blue chip stocks.

back in the 1930’s, a blue chip stock might be wheat or cattle since america was still largely rural back then.

yahoo and google might be considered blue chip on the nasdaq. nasdaq is mostly computer companies and big internet companies. software companies like microsoft, norton, symantec would probably be listed on the nasdaq.

as long as we have computers, the nasdaq will never faulter.

Answer by Goldlion168
put it a simple term DOW is an index of the stock prices of 30 major and large companies that best represent of the USA industry. NASDAQ stands for National Association of Securities Dealers Automated Quotations system is a automated system that mostly active trade by high tech. companies. Therefore, you don’t really have to know how to calculated, because it is too complicated, for example, “DOW is price-weighted index which stock market index in which stocks are held in proportion to their share price, and NASDAQ is value-weighted index which stock market index in which stocks are held in proportion to their total company market value”. for that definition, the index surely can become zero but not negative number. thinking if a company got bankrupt, its price would reach zero but not negative number. in basic understanding, if all the stocks in an index is going down, it brings the index down. For example, if Dow index downs 300 or 400 points which is a crack, you can expect all 30 stocks’ price in DOW down a lot, and if the big 30 companies’ down so much then most companies’ stock price would be down at the same time. Therefore, those index are the indicator for the market condition.

Answer by Frank Castle
If there is a Big Stock Market Crash these indices won’t fall to Zero because the companies are still there making money and at some point somebody is going to realize the stock is actually less than the real value of the company and they will buy billions of shares.

One of the Components of the Dow is Wal-Mart.
Currently Wal-Mart costs $ 201 Billion and they make over $ 10 Billion a year.

Therefore if Bill Gates, Warren Buffet Jr, Carlos Slim, Ingvar Kamprad, Lakshmi Mittal, Paul Allen and Bernard Arnault decide to buy Wal-Mart they will get their money back in 20 years if the profits stay flat.

Obviously Wal-Mart is growing and the profits will keep getting bigger and bigger over the years.

Maybe they will get their money back in 15 years.

This is today.

Tomorrow the market crashes and Wal-Mart goes down 50%

Now they only need to pay $ 100 Billion and they will get their money back in 10 years or less.

The next day the market is still going down and Wal-Mart goes down 75%

Now they need to pay $ 50 Billion and they will get their money back in 5 years or less.

The next day the market is still going down and Wal-Mart goes down 90%

Now they need to pay $ 20 Billion and they will get their money back in 2 years or less.

And so on.

Some very smart investors will start to buy Wal-Mart when it goes down 50%, some 75% and some 90% but no matter how low the stock price goes. Wal-Mart is still making millions of dollars every day and that is valuable.

Obviously when the number of shares bought is bigger than the number of shares sold then the stock starts to go up again.

The same applies to each of the 30 companies included in the Dow.

The day after the crash all these companies will still be making a lot of money:

Walt Disney, Verizon, Pfizer, Microsoft, Procter & Gamble, McDonald’s, Exxon Mobil, General Electric and so on.

The same example applies to NASDAQ.

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