The NASDAQ Composite is a market-cap-weighted index of every common stock and similar security listed on the NASDAQ exchange. It is best known as a technology-heavy index.
The Nasdaq Composite is a market-capitalization-weighted index covering the vast majority of the thousands of stocks listed on the Nasdaq exchange. It has been calculated since the exchange launched in 1971 and is maintained by Nasdaq itself. Because mega-cap technology companies dominate its weight, it is widely treated as the benchmark for U.S. tech and growth stocks. It should not be confused with the Nasdaq-100, a narrower index of the exchange's 100 largest non-financial companies.
The Nasdaq is read primarily as a barometer of sentiment toward technology and growth stocks. Growth companies derive much of their value from earnings expected far in the future, which makes the index unusually sensitive to interest rates, and it often falls harder than other benchmarks when rates rise. When the Nasdaq outperforms the S&P 500 or the Dow, markets are generally rewarding growth expectations. Persistent underperformance, by contrast, is often taken as a sign of risk aversion or rate pressure.
Key drivers include the earnings of large technology companies, U.S. Treasury yields, and expectations for secular themes such as artificial intelligence and cloud computing. Rising real interest rates compress growth-stock valuations and tend to weigh on the index. The semiconductor cycle also matters, so the Philadelphia Semiconductor Index (SOX) is a useful companion gauge. Analysts typically cross-check the 10-year Treasury yield, the S&P 500, and the dollar index when reading Nasdaq moves.