1. Archive

Big changes in stock market show how the world economy is connected

Published Oct. 2, 2005

In today's world, everybody is connected. The Internet and television link people through instant communication. Such issues as global warming link people with concerns about the environment. Brand names, for example Nike and Coke, link people through the products we like.

The businesses that make products also are tightly connected around the world.

In no way was that clearer than in the wild happenings that shook the American stock market last week. Concerns about businesses and finances in Asia set off changes in the United States that caused the biggest one-day point drop in the history of the Dow Jones Industrial Average, the key U.S. measure of stocks.

The next day brought an upward swing almost as dramatic. What happened in the United States then affected what happened to stocks and finances in other nations during the rest of the roller-coaster week.


Stocks are shares people can buy to become part-owners of companies. Stocks are bought and sold in marketplaces called stock exchanges. The value people place on a business is shown by the price of stock in that business. The higher the value, the higher the price.

Many of the most valued stocks are for companies that do business in nations all over the world. Until recently, Asia was an attractive place of business for many "multinational" companies.

In the last 10 years, Asia has been the world's fastest growing region for business and jobs. Now, businesses are facing some problems in that region.

One reason for the wild ups and downs in the U.S. stock market last week was that many people who felt uncertain about Asia's future decided to sell stock they owned in companies active there.

Dramatic events

Last week's rise and fall in the prices of stocks came at a time when the United States was showing overall strength in business and finance.

For years, the value of stocks traded here has been going up, more than doubling the Dow Jones average in the last two years alone. Some experts said the prices of stocks had gotten too high _ that the stocks were "over-valued." These experts believed the stock market was due for a change toward lower prices, what the experts call a "correction." The problems in Asia caused a drop that was overdue anyway, they said. When the price of a stock falls, owners of that stock are said to "lose money." This is true if they recently bought the stock at a high price and the price dropped to less than they paid.

However, many stock owners bought earlier, when prices were lower. They held on to their stocks as prices went way up and then came down a little. The value of their stock is still higher than what they paid, so they've actually made money, just less of it. And stock prices may well rise again.

A bigger worry than stock losses is possible loss of jobs here if multinational companies lose money in Asia.


1. The stock market is one way to measure the health of business, finance and jobs in a country or region. As a class, brainstorm other ways you could measure how healthy a country or area is for business and jobs. Then make a list of ways to measure the health of your area.

2. Following the stock market is a good way to practice math skills. Pick five stocks that are listed in the stock tables of the paper. Find the "last" price for a share of each stock. It may be written using fractions _ 13{, for example, would equal $13.50. Figure how much it would cost to buy 10 shares of each. Look at the listing tomorrow to see how the prices have changed. Compute how much you gained or lost on your shares.

3. Fractions can be found elsewhere in the paper as well. Find a fraction that is more than two-tenths (2/10); two-thirds (2/3) of a comic strip; a store offer for one-quarter (1/4) off; an ad larger than one-half (1/2) of a page.

4. In today's paper, find ads for five products you like. Write a sentence for each stating why it would be wise or unwise to buy stock in the company that makes the product.