The S&P 500 is a market index that uses the market-value weighted average of 500 stocks chosen by a committee, while the Nasdaq is a market index that averages the performance of all of the stocks currently traded on the Nasdaq stock exchange. The committee strives to get a broader view of the market by including stocks from various industries, but the Nasdaq exchange trades primarily tech and similarly innovative companies, explains About.com.
The use of a market-value weight in the S&P 500 gives a dramatically different result than the actual values reported in the Nasdaq, and both require consideration to make informed investing decisions. Companies that make the S&P 500 lists must have a market capitalization of at least $5 billion, show a year of profit under specific terms, demonstrate adequate liquidity and have at least a public float of 50 percent, according to the Motley Fool.
The Nasdaq market index allows investors to know quickly how tech giants and other innovative companies fare in the investment world, reports USA Today. Some banking companies and even newer airlines also appear on the Nasdaq exchange, giving it broader appeal to those outside the tech sector. It does not have capitalization, profitability or liquidity requirements for inclusion. Alternatives to the two indices include the Dow Jones Industrial Average and the Wilshire 5000.