Before you scroll
- Index moves make more sense in percent than in points; a 75-point fall means little until you know the index level.
- A share quote packs in price, change, volume, market value and valuation ratios such as P/E; each tells you something different.
- Daily explanations of why the market moved are usually written after the fact; treat them as stories, not forecasts.
How to read the stock market is a skill of translation. A market page is full of numbers in red and green, and headlines that explain each wobble with great confidence. This guide takes the main figures one at a time: what they measure, how to put them in context, and which ones are noise.
Start with the indices, in percent
Market reports lead with indices such as the S&P 500, the Dow Jones Industrial Average, the Nasdaq Composite, the FTSE 100, the DAX or the Nikkei 225. Each is a single number summarising a basket of shares, and they are built differently: the S&P 500 weights about 500 large US companies by the market value of their freely traded shares, while the Dow and the Nikkei 225 are weighted by share price.
Points mean little without the level. An illustration: if an index stands at 5,000 and falls 75 points, that is a 1.5% fall (75 ÷ 5,000). The same 75 points on an index at 40,000 is less than 0.2%. Headlines that say an index "plunged 500 points" are sometimes describing a fairly ordinary day. Always convert to percent.
Also note which index is being quoted. The Nasdaq Composite covers nearly every company listed on Nasdaq, while the Nasdaq-100 covers only the largest non-financial ones. A strong day for a handful of giant companies can lift a value-weighted index even when most shares fell.
Reading a share quote
| Field | What it tells you |
|---|---|
| Last price and change | The most recent trade, and the move since the previous close, in money and percent. |
| Bid and ask | The best prices at which people are willing to buy and sell right now; the gap is the spread. |
| Day range and 52-week range | The lowest and highest prices today and over the past year, useful for context but not a prediction. |
| Volume | How many shares changed hands. A big move on unusually heavy volume carries more information than one on light volume. |
| Market capitalisation | Share price multiplied by the number of shares: the stock market's valuation of the whole company. |
| P/E ratio | Share price divided by earnings per share. A price of $60 with earnings of $4 a share gives a P/E of 15. |
| Dividend yield | Annual dividends per share divided by the price, as a percentage. A high yield can signal a falling share price rather than generosity. |
No single field is a verdict. A high P/E may mean investors expect fast growth, or that they are overpaying; a low one may mean the company is cheap, or that its earnings are about to fall. The number is the start of a question, not the answer.
Breadth: how many shares joined in
Market breadth compares how many shares rose with how many fell, and how many are at new highs or lows. It helps separate a broad rally from one carried by a few very large companies. When an index rises while most of its members fall, the market is more fragile than the headline suggests.
Sector tables do a similar job. If technology rose sharply while every other sector fell, the day was about technology, not about "the market". Our guide to AI stocks looks at what happens when a single theme dominates an index.
Timing: sessions, futures and gaps
Stock exchanges keep fixed hours: New York 09:30 to 16:00, London 08:00 to 16:30, Tokyo 09:00 to 15:30 with a lunch break. Before the open, index futures and pre-market trading give an early reading, but on thin volume. When news arrives overnight, prices often open at a different level from the previous close, a gap. Our market board shows which exchanges are trading now, and how the stock market works explains the mechanics.
Headlines, forecasts and "why the market moved"
Daily market reports have to explain every move, so they pick the most plausible news item of the day. Sometimes that explanation is right; often it is chosen after the fact. On a different day the same news might be described as the reason for a rise. Read these reports for information about what happened, not for insight into what will happen.
Be wary of:
- predictions of an imminent crash or surge from people who sell courses, newsletters or signals;
- chat groups that share "the next big stock" in small companies, the setup of a pump and dump;
- screenshots of gains used to recruit you into a paid group or a platform.
How to spot trading scams covers these in detail.
A calm routine for reading the market
- Check the main index moves in percent, not points.
- Look at breadth and sectors to see whether the move was broad or narrow.
- For any share you own, read the company's own announcements rather than commentary about them.
- Ignore intraday noise unless you have a genuine reason to act, and remember that trading often costs money; see hidden trading costs.
Reading the market well mostly means reacting less. A plan made in advance, such as a regular investment into a diversified fund, is rarely improved by watching every tick.
Readers also ask
What does it mean when the market is 'up'?
It usually means a major index such as the S&P 500 or FTSE 100 is higher than at the previous close. It says nothing about how an individual share performed, and many shares can fall on an 'up' day.
Is a low P/E ratio a sign that a share is cheap?
Not by itself. A low P/E can reflect a genuinely undervalued company, or investors expecting earnings to fall. Compare it with similar companies and with the company's own history, and read why earnings are where they are.
Why did the market open far from yesterday's close?
News that arrives while an exchange is closed is priced in at the next open, so the first trade can be well above or below the previous close. This is called a gap.