What is a stock market index?

A stock market index is a measurement of the performance of a group of stocks, representing a particular sector, market, or the overall stock market. Common examples include the S&P 500, which tracks the performance of 500 large U.S. companies, and the Dow Jones Industrial Average, which tracks 30 significant U.S. companies. Stock market indexes are used by investors to gauge the overall health of the market, identify trends, and make informed investment decisions. They provide a snapshot of market performance and are widely used in financial reporting and analysis.