View from Wall Street: Understanding the U.S. stock exchange

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.

The New York Stock Exchange (NYSE) is the biggest stock market in the world. It is valued at $13.5 trillion, and it lists more than 2,800 companies including Coca-Cola, Exxon Mobil, and Krispy Kreme Doughnuts.

The oldest stock price measure in continuous use is the Dow Jones Industrial Average, which was introduced by Charles Dow in 1896. Today, the Dow is the most widely followed measurement of the stock market. Its average is composed of 30 stocks that represent leading companies in major industries. Among those companies is Proctor & Gamble, which makes Crest toothpaste, Pampers diapers, and Tide detergent.

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

Some of the world's largest technology companies list their shares on the NASDAQ stock exchange. NASDAQ is an acronym for National Association of Securities Dealers Automated Quotation System. Microchip manufacturer Intel, software maker Microsoft, and 3,472 other companies are listed on the NASDAQ stock market. Unlike the NYSE, which uses an auction-listed system, the NASDAQ system is completely electronic.

Another index in the stock market is the Standard & Poor's 500 (S&P 500). It is composed of 500 stocks by which many experts judge the market as a whole.

Investors returning to the stock market after Memorial Day weekend embarked on a buying spree. On Tuesday, the Dow closed up almost 180 points at 8781.35, and the NASDAQ surged 46 points to close at 1556.69 - the highest level of the year. And the S&P 500 rose 18 points to 951.48. The closing level of an index indicates what value the entire index has at the end of the day.

Two major factors contributed to Tuesday's rally. Consumer confidence, which denotes how hopeful people are about the economy, rose in May to its highest level in six months. A second factor was due to increased home sales, which reached near-record levels in the month of April. That means that consumers have been spending more money on goods, services, and homes in recent weeks.