NASDAQ Composite Index
Good ETF Proxy: QQQ - Invesco QQQ Trust
The NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on the NASDAQ Stock Market.
Today the NASDAQ Composite includes over 3,000 companies, more than most other stock market indexes. Because it is so broad-based, the Composite is one of the most widely followed and quoted major market indexes.
The origins of the NASDAQ began in 1961, when Congress authorized the Securities and Exchange Commission to conduct a study of fragmentation in the over-the-counter market. The SEC proposed automation as a possible solution, and entrusted the National Association of Securities Dealers, with its execution.
Launched on February 5, 1971 with a base value of 100 points, the NASDAQ Composite (which was the National Association of Securities Dealers Automated Quotations) is a broad based index which is calculated under a market capitalization weighted methodology that began trading with median quotes for 2,500 over-the-counter securities. As of 2009, the index has grown to include over 3,000 companies.
On July 17, 1995, the index closed above the 1,000 mark for the first time. The all-time low for the index had been reached in October 1974 around 54 points, representing a market drop of more than 45% from the time of its introduction. The decline in the index surrounded the overall negative mood revolving around the 1973-1974 Stock Market Crash along with it being aggravated by the Yom Kippur War and the 1973 Oil Crisis which followed it soon after.
On March 10, 2000, the index peaked at an intra-day high of 5,132.52, and closed at an all-time high of 5,048.62; the decline from this peak signaled the beginning of the end of the dot-com bubble.
The index declined to half its value within a year, and finally found a bear market bottom on October 10, 2002 with an intra-day low of 1,108.49 after a close of 1,114 the previous day. While the index gradually recovered since then, it did not trade for more than half of its peak value until May 2007.
The 2000s brought a mix of pessimistic news stemming from the Early 2000s recession, the September 11 attacks and the impending Afghan War along with the 2003 invasion of Iraq.
The index opened the fourth quarter of 2007 with new 80-month highs, fueled by future possible takeovers and mergers, healthy earnings reports particularly in the tech sector, and moderate inflationary readings; closing above the 2,800 point mark on October 9, 2007. The intraday level of 2,861.51 on October 31, 2007 was the highest point reached on the index since January 24, 2001.
On September 29, 2008, the NASDAQ dropped nearly 200 points, the most since the tech bubble burst, losing 9.14% (third largest in history) to fall beneath the 2,000 level.
Towards the beginning of January 2010, the composite made a staggering 79% rebound from its March lows towards the 2,269 level, amid hope that the Late-2000s Recession, the United States housing bubble and the Global financial crisis of 2008–2009 were easing and possibly coming to an end.
Criteria for Index Additions
To be eligible for inclusion in the Composite, a security's U.S. listing must be exclusively on the NASDAQ Stock Market (unless the security was dually listed on another U.S. market prior to 2004 and has continuously maintained such listing), and have a security type of either:
- American Depositary Receipts (ADRs)
- Common Stock
- Limited Partnership Interests
- Ordinary Shares
- Real Estate Investment Trusts (REITs)
- Shares of Beneficial Interest (SBIs)
- Tracking Stocks
Closed-end funds, convertible debentures, exchange traded funds, preferred stocks, rights, warrants, units and other derivative securities are not included. If at any time a component security no longer meets the above criteria, the security becomes ineligible for inclusion in the Composite Index and is removed.