Expert: Paul Henneman - 2/25/2004

Question
When I see that the S&P 500 is at 1143, what does that figure "1143" stand for.  I've heard it referred to as points, but what are points?  If it's dollars, then how is it derived--surely it isn't the average stock price of the index.

Answer
Thank you for your question!
Yes, it is true that the S&P 500 index is not simply the average stock price. Instead, it is derived through relative weightings to accomodate the differences in numbers of outstanding shares for each company in the S&P 500.  So it is directly related to stock price and weighted heavily to accomodate differences in number of shares traded publicly. It is a large cap index that primarily tracks the industrial, transportation, financial, and utility stocks. The stocks that are in the index change from time to time, and the number of stocks in sector I mention does change also.
I hope this helps! Please do not hesitate to follow up with me if I can be of any additional service!

Sincerely,
Paul Henneman
President
ValuEngine, Inc.
www.ValuEngine.com