The short answer
- Judge index moves in percentages, not points; a 75-point drop can be small or large depending on the index level.
- A stock quote gives price, change, bid and ask, volume, market value and valuation measures such as the P/E ratio.
- A single day's move is mostly noise; context comes from sector moves, news and longer time frames.
Where do you start when reading the market?
Learning how to read the stock market starts with the big indices, then the sectors, then individual shares, always in percentage terms.
A market report usually opens with a line such as "the S&P 500 fell 1.5%" or "the FTSE 100 closed 40 points higher". Those indices summarise hundreds of companies in one number. From there you look at which groups of companies, or sectors, led the move, and only then at individual shares. That order stops one dramatic headline about a single stock from distorting your view of the whole market.
What does an index move actually mean?
Points tell you how far the number moved; percentages tell you how much it matters.
Different indices also measure different things. The S&P 500 weights companies by the value of their freely traded shares, so the largest businesses move it most. The Dow Jones Industrial Average and the Nikkei 225 are price-weighted, so a company with a high share price has more influence regardless of its size. When two indices disagree on a given day, the way they are built is often the reason. Our stock market guide lists the main ones.
What is on a stock quote page?
| Figure | What it tells you |
|---|---|
| Last price and change | The most recent trade, and how far it is from the previous close, in money and percent |
| Bid and ask | The best prices to sell and buy right now; the gap is the spread |
| Volume | How many shares have traded today, compared with a typical day |
| Market cap | Share price × number of shares: the market's total value for the company |
| P/E ratio | Share price ÷ earnings per share over a year |
| Dividend yield | Annual dividend ÷ share price |
| 52-week range | The lowest and highest prices of the past year |
A high P/E can mean investors expect fast growth, or that the price has run ahead of the business. A low one can mean a bargain, or a company in trouble. On its own, no single ratio answers the question.
How do you read volume and price together?
A move on heavy volume carries more weight than the same move on light volume.
If a share jumps 8% on three times its usual volume after an earnings report, many investors have acted on new information. A similar jump on thin volume, perhaps just before a holiday, may reverse as soon as normal trading returns. The same idea applies to indices: broad moves, where most shares rise or fall together, say more than an index pushed around by a handful of very large companies.
Why check sectors as well as indices?
Because an index can hide very different stories underneath it.
Markets are commonly split into sectors such as technology, financials, energy, healthcare and consumer goods. On a day when an index is flat, technology may be up sharply while energy falls, perhaps because of a move in oil prices. If you hold shares in one sector, that sector's move matters more to you than the headline number. Sector views also show whether a rise is broad, with most areas participating, or narrow, driven by a few large companies that dominate the index weighting.
What moves the market on a given day?
- Economic data: inflation, jobs and growth figures released on published calendars.
- Central banks: interest-rate decisions and the language used to explain them.
- Company earnings: results and forecasts, often released before the open or after the close.
- Global events: moves in overseas markets overnight, commodity prices, and political news.
Before the New York open, index futures and pre-market trading give an early indication of the mood. They are thinly traded and can change quickly once the regular session starts at 09:30 New York time. Check which markets are open on our live market board.
What is a sensible routine for checking the market?
Look at the main index for your market, then the sector for anything you own, then the news behind any large move. Once a day is plenty for most investors, and once a week is enough for many.
How should a beginner use all this?
Use daily figures for context, not as instructions. A falling day is not a signal to sell, and a rising one is not a signal to buy. Most long-term results come from what you own and for how long, not from reacting to each headline. When you do look, compare the day's move with the past month and year, check whether the whole sector moved, and look for the news behind it.
For the practical side of placing orders and holding shares, see how the stock market works, and for the costs that frequent trading adds up to, read trading fees explained.
Quick follow-ups
Why do markets move when nothing seems to have happened?
Prices reflect the combined decisions of many investors, including large funds rebalancing, options expiring and news in other time zones. Not every move has a single clear cause.
Is a low P/E ratio always a good sign?
No. It can mean a share is cheap relative to its earnings, or that investors expect those earnings to fall. Compare it with similar companies and look at why it is low.
What does it mean when a market is up in pre-market trading?
Index futures or early trades are pointing higher before the regular session opens. These indications can reverse once full trading begins.
Sources
- S&P Dow Jones Indices and Nikkei, index methodologies
- NYSE and Nasdaq, published trading hours