Investigate the connection between new home sales and the stock market

Overview: Investors purchased enough shares on Tuesday to send the stock market soaring. The Dow Jones Industrial Average and the NASDAQ stock exchange both climbed significantly, and the news could signal a brightening future for the U.S. economy.

After students read "View from Wall Street: Understanding the U.S. stock exchange" present the following:

RESOURCES • CNN/Money: Investing 101  • CNN Money.com: Winning day on Wall St.  • U.S. Federal Reserve  • U.S. Securities and Exchange Commission  • Holt, Rinehart and Winston: Economics

1. What is the New York Stock Exchange (NYSE)? How many companies trade their stocks in this market? What are some of the companies that trade their stocks on the NYSE? What is the Dow Jones Industrial Average? When was it first introduced? How is the Dow "average" calculated? What is the NASDAQ? What differentiates the NASDAQ from the other stock markets? How many companies are listed on the NASDAQ market?

2. What does the reporter mean when she says, "Even Krispy Kreme doughnuts trades here on the New York Stock Exchange"? What gets traded? How might you rephrase this statement more simply?

3. Why was Tuesday considered a great day on Wall Street? At what number did the Dow Jones Industrial Average end the day? At what number did NASDAQ end the day? What does this number represent? Why is it considered a good thing that the stock market closed the day with these numbers? How might this information affect you directly? How might consumer confidence and the fact that Americans continued to buy new and existing homes at near-record levels have contributed to the big rally in the stock market?

4. Ask students to consider why increases in the sales of new homes could be good news for the economy and thus encouraging news for investors. Challenge small groups of students to create graphic organizers to illustrate the ripple effect that new home sales have on the economy. Students should consider the jobs and businesses that would be affected by the increase in sales of new homes. (Answers could include jobs such as builders, landscapers, painters and electricians, and businesses such as lumber, banks and nurseries.) After student groups have presented their graphic organizers to the class, each student should write a short paragraph that fills in the following: "The reason why an increase in new home sales is a good sign for investors is because..."

5. Teachers: For an activity on investing, see Investing 101 (http://fyi.cnn.com/2000/fyi/lesson.plans/09/18/investing.101/index.html). Also, be sure to visit Harcourt's Stock Market Game (http://www.harcourtcollege.com/finance/ students/bkstock.htm).