Weekly Online Lesson Online Lesson Archive Grade Level: 7-12 Subject: Economics/Finance

When the Dow Brakes

The Dow Jones industrial average suffered its steepest one-session point loss in history Friday, April 14, tumbling 617.78 points to 10,305.77. The day's sell-off handed the Nasdaq its biggest point loss of all time—355.49 points—topping the last big plunge set just five days before.

In the wake of Friday’s dramatic stock market slide, Wall Street is bracing itself for another spasm of selling when trading resumes Monday as investors who borrowed money to buy stocks may be forced to sell when faced with margin calls.

Why are the markets in free-fall mode? The move started after April 3, the day Judge Thomas Penfield Jackson ruled against Microsoft in a well publicized antitrust case. Microsoft promptly fell more than 15 percent, and other technology stocks followed right after. Before long investors' exodus from falling tech stocks (sometimes called New Economy stocks) had spread to blue-chip industrials (sometimes called Old Economy stocks).

What does it all mean? Find out in this online lesson about stock market terminology.

About Stock Trading

Trading securities (stocks) didn't start in the 20th century, nor in the century before that. The first American exchanges were first developed in the late 18th century, and were based on exchanges in Britain that started much earlier. A good place to learn about the history of U.S. trading is the Ameritrade Education Center. Click the Stock Market Overview tab, and then click Some History. This page which will walk you through the history of the formation of U.S. stock exchanges. What is the significance of Wall Street? What is the SEC and why was it formed? Check out the stock market timeline for a brief overview of major market events.

When you understand a little about the history of the U.S. stock exchanges, click How the Stock Market Works and study this page. Find out why many companies prefer issuing stock instead of borrowing money. Why would a stockholder want to own stock?

Now click the Market Dynamics link. If all this talk of bears and bulls has you wondering if this is an earth science lesson, this section should clear things up. What causes markets to move up or down? What are good strategies for investing in bear markets? What are good strategies for bull markets? Which kind of market would you rather invest in?

Market Indicators

Exchanges are comprised of numerous companies whose stocks independently rise and decline in value. How can you tell if the market as a whole is moving up or down? To understand this you need to know about the major market indicators. The Dow Jones Industrial Average is the most familiar indicator. Visit the Dow Jones site to learn how it got started and what it tells investors. Review a list of the DJIA stocks. Do you recognize any of these companies?

Return to the Ameritrade Education Center and click Market Indicators. Read the page about watching market indicators. How are different indices calculated? Click Nasdaq Index. The tech-heavy Nasdaq exchange is leading the overall market decline. How does the Nasdaq Index help gauge the severity of the decline?

Reading Stock Quotes

End this week's lesson by clicking on the Ameritrade Learning to Invest tab, and then click Following a Stock. This section will show you how to read a newspaper stock table as well as an online stock quote. What are the nine terms or figures that make up a stock quote? Of these, which two do you think are most important to investors?

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