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What does "points" mean in such contexts (stock exchange, I believe)? It would be also great if you provide references or example sentences.

"S&P 500 is holding above the Moving Averages 10 it is expected to rise to around 2,000 points."

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    Points are also an applicable term in interest rates, in this case, referred to as "points" or "basis points" meaning 0.01% change being one "basis point" – Marcus D May 20 '16 at 9:21
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What does "points" mean

In any stock market, there are certain stocks that go up and certain stocks that go down. Hence if we want to find the generic health of stock market, i.e. on an average is it going up or down, we have no means to find out.

A practise that has evolved over the years is take a set of companies and find if on average they have gone up or gone down. In very simple terms say in 1970 I take the Market Capitalization of a set of 50 companies, lets say its value is "X". I would now call this index as value of 100. Now after a month if the Market Capitalization is 2X, the index value would be 200. After another month if the Market Capitalization come down to 1.5X, then index value would be 150. So essentially now one is able to get the general trend more easily.

S&P is an index of Select 500 companies based on various parameters. So in isolation 2000 does not mean anything. However as a comparison it does give quite a bit of insight. Note there are various adjustments made to factor, i.e. certain companies go bankrupt or are not doing well are removed from Index, share splits, mergers, etc. This ensure that the Index is neutral and does not show unwarranted spikes.

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Points are the units of measurement of the index. They're calculated based on the index formula, which in turn based on the prices of the underlying stocks.

Movement in points is not really interesting, the movement as a percentage of the base price (daily opening, usually) is more interesting since it gives more context.

  • Completely agree with the second sentence. The older guys in my office talk about 100 point drops in the Dow as though it's the coming of the apocalypse because 20 years ago 100 points was a lot. – quid May 20 '16 at 16:50

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