Dow vs S&P 500: two scoreboards for US stocks
When the news says "stocks rose today", it usually quotes the Dow or the S&P 500. They often move together, but they're built so differently that some days they disagree.
The short answer
The Dow Jones Industrial Average tracks 30 large US companies. It's price-weighted: a stock with a higher share price moves the index more, no matter how big the company is.
The S&P 500 tracks about 500 large US companies. It's weighted by company size (the value of the shares available to trade), so the biggest companies move it most.
Most professionals treat the S&P 500 as the better picture of the US stock market. The Dow is older and still famous.
Side by side
| Dow Jones Industrial Average | S&P 500 | |
|---|---|---|
| Started | 1896 | 1957 (in its 500-stock form) |
| Companies | 30 | About 500 |
| Weighted by | Share price | Company size (float-adjusted market value) |
| Chosen by | A committee at S&P Dow Jones Indices | A committee at S&P Dow Jones Indices |
| How much of the market | A narrow slice | A large share of US stock market value |
| E-mini futures | YM, $5 per point | ES, $50 per point |
| Micro futures | MYM, $0.50 per point | MES, $5 per point |
| Well-known ETF | DIA | SPY (and several others) |
Price-weighting, with numbers
Imagine a tiny Dow with two stocks:
- Stock A trades at $400.
- Stock B trades at $40.
Both rise 10% today. Stock A gains $40. Stock B gains $4. In a price-weighted index, Stock A moves the index ten times more, even if Stock B is the bigger company.
That's the Dow's quirk. A stock split, which lowers the share price without changing the company, also lowers its weight. The Dow uses a "divisor" to keep the index level steady when that happens.
Size-weighting, in plain words
In the S&P 500, a company worth $3 trillion counts about 30 times more than one worth $100 billion. Share price alone doesn't matter.
This means a handful of the largest companies can drive a big part of the index's move on any day. See Market cap.
The Dow: strengths and limits
What it does well:
- Long history. Data back to 1896 makes it a common reference for big moments.
- Simple story. 30 well-known names that most people recognise.
The limits:
- Price-weighting is odd. A high-priced stock can dominate for reasons that have nothing to do with size.
- Narrow. Thirty companies can't show the whole market.
The S&P 500: strengths and limits
What it does well:
- Broad. About 500 companies across every major sector.
- Weighted by size. Bigger companies count more, which matches how much money is in them.
- The benchmark. Many funds compare themselves to it.
The limits:
- Top-heavy. The largest firms carry a lot of weight.
- Still large companies only. Small companies live in other indexes, like the Russell 2000.
Point moves aren't percent moves. "The Dow fell 500 points" sounds bigger than "the S&P fell 60 points", but the Dow's index level is much higher. Always compare percentages.
Which fits you?
- You want one number for "the US market": the S&P 500. See the S&P 500.
- You trade index futures: ES and MES follow the S&P 500. YM and MYM follow the Dow. Micros are a tenth the size. Check tick values with the futures tick value calculator and current specs on cmegroup.com.
- You follow the news: know both, and read the percentage.
Whichever you watch, read it the same way: the bigger chart first, the last turning points, and a body close before calling a break.
Common mistakes
- Judging the day by Dow points. Use percentages.
- Thinking the Dow is "the market". It's 30 stocks, picked and weighted in its own way.
- Assuming they always agree. A tech-led day can move the S&P 500 and the Dow by different amounts.
- Sizing an ES trade like an MES trade. ES is ten times bigger. Size from your stop with the position size calculator.
Questions
What is the difference between the Dow and the S&P 500?
The Dow tracks 30 large US companies and weights them by share price. The S&P 500 tracks about 500 large US companies and weights them by company size. The S&P 500 gives a broader view of the market.
Why is the Dow price-weighted?
When Charles Dow created it in 1896, adding up prices and dividing was the simplest way to calculate an average by hand. The method stuck for tradition and continuity.
Which is better to follow, the Dow or the S&P 500?
Most professionals use the S&P 500 as the main US benchmark because it's broader and weighted by size. The Dow is still widely quoted and useful for history.
Are there more than 500 stocks in the S&P 500?
The index holds 500 companies, but a few have more than one class of shares, so it usually lists slightly more than 500 stocks.
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