Market Glossary

Bull Market: A prolonged rise in prices, usually lasting at least a few months, driven by optimists who anticipate good corporate earnings in the months or years ahead.

Bear market: A prolonged drop in prices that begins when pessimists dominate the market. It is usually brought on by the anticipation of a decline in economic activity.

Correction: A reverse movement in prices, usually downward, that occurs in a long-term move. Often referred to as a pause or shakeout. Markets do not move upward or downward in a straight line, an periodic corrections are to be expected.

Crash: A precipitous drop in prices. So far, Wall Street has seen two crashes, Oct. 29, 1929, when the Dow Jones industrial average lost 12.82% of its value, and Oct. 19, 1987, when it plunged 22.6%.

Stock buyback: Companies buy back their own shares to boost the price of their stock and sometimes as a defensive move against a takeover. A market plunge makes stocks cheaper, enabling companies to buy back more of their shares.

Where are we now? The stock market has been considered a bull market since 1982, even with the 1987 crash taken into consideration. Given the market’s comeback Tuesday, it’s too soon to tell if Monday’s 554-point plunge in the Dow was a correction or the end of the bull market.

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Major Indexes

The stock market’s performance is tracked through a number of indexes. Among the most widely followed:

Dow Jones industrial average: Reflects movements of 30 big stocks, including IBM, General Motors and Coca-Cola. Represents less than 1% of public companies, but reflects overall market.

Standard & Poor’s 500: Considered a more accurate measure of the market. Some mutual funds have portfolios limited to S & P 500 stocks.

NASDAQ Composite: An index that measures certain stocks, particularly technology issues and smaller-company shares, trading on the NASDAQ market.