- S&P 500
The S&P 500 is a
stock market indexcontaining the stocks of 500 Large-Cap corporations, all of which are from the United States. The index is the most notable of the many indices owned and maintained by Standard & Poor's, a division of McGraw-Hill. S&P 500 is used in reference not only to the index but also to the 500 companies that have their common stock included in the index.
The S&P 500 index forms part of the broader
S&P 1500and S&P Global 1200stock market indices.
All of the stocks in the index are those of large publicly held companies and trade on the two largest US stock markets, the
New York Stock Exchangeand NASDAQ. After the Dow Jones Industrial Average, the S&P 500 is the most widely watched index of large-cap US stocks. It is considered to be a bellwetherfor the US economy and is a component of the Index of Leading Indicators. It is often quoted using the symbol SPX or INX, and may be prefixed with a caret(^) or with a dollar sign ($).
index funds and exchange-traded funds track the performance of the S&P 500 by holding the same stocks as the index, in the same proportions, and thus attempting to match its performance (before fees and expenses). Partly because of this, a company which has its stock added to the list may see a boost in its stock price as the managers of the mutual funds must purchase that company's stock in order to match the funds' composition to that of the S&P 500 index.
In stock and mutual fund performance charts, the S&P 500 index is often used as a baseline for comparison. The chart will show the S&P 500 index, with the performance of the target stock or fund overlaid.
The S&P 500 index was created in 1957, but it has been extrapolated back in time. The first S&P index was introduced in 1923. Prior to 1957, the primary S&P stock market index consisted of 90 companies, known as the "S&P 90", and was published on a daily basis. A broader index of 423 companies was also published weekly. On
March 4, 1957, a broad, real-time stock market index, the S&P 500, was introduced. This introduction was made possible by advancements in the computer industry which allowed the index to be calculated and disseminated in real time.
The S&P 500 is used widely as an indicator of the broader market, as it includes both "growth" stocks (which inflated and then deflated in the
dot-com bubbleand bust) and generally less volatile "value" stocks; it also includes stocks from both the NASDAQstock market and the NYSE. The index, near the height of the bubble, reached an all-time intraday high of 1,552.87 in trading on March 24, 2000, and then lost approximately 50% of its value in a two-year bear market, spiking below 800 points in July 2002 and reaching a low of 768.63 intraday on October 10, 2002. After that, the US stock markets gradually recovered, but the S&P 500 lagged the popular Dow Jones Industrial Averageand total-market Wilshire 5000indices by remaining below its highs of year 2000 for a longer period. On May 30, 2007, the S&P 500 closed at 1,530.23 to set its first all-time closing high in more than seven years. On July 13, 2007, the index followed a nearly thirty-point gain the previous day by setting a new intra-day nominal (not inflation-adjusted) record of 1,555.10 points, its first of the 21st century. However, difficulties with subprime mortgagelending spread to the wider financial sector, leading to the resumption of the bear market in November. Accelerating a nearly year-long decline, the S&P 500 suffered its largest point drop ever on September 29, 2008, losing 106.85 points (8.81%, second largest ever), and closed below 1,000 on October 7for the first time since 2003. As of the Friday close on October 10, 2008 at 899 points (after an intraday low near 840), the index has lost more than 20% in the month of October alone and 43% from its record highs.
The components of the S&P 500 are selected by committee. This is similar to the Dow 30, but different from others such as the
Russell 1000, which are strictly rules-based.
The index does include a handful (13 as of
July 6, 2007) of non-U.S. companies. This group includes both formerly U.S. companies that are now incorporated outside of the United States, but which were grandfatheredand allowed to remain in the S&P 500 after their expatriation, and companies that have never been incorporated in the United States.
The committee selects the companies in the S&P 500 so they are representative of various industries in the United States economy. In addition, companies that do not trade publicly (such as those that are privately or mutually held) and stocks that do not have sufficient
liquidityare not in the index - a notable example of an illiquid stock not in the index is Berkshire Hathaway, which as of June 30, 2008had a market capitalization larger than all but 6 of the members of the S&P 500, but which also had a stock price (in the case of its class A shares) greater than $100,000, and so was very difficult to trade. By contrast, the Fortune 500attempts to list the 500 largest public companies in the United States by gross revenue, regardless of whether their stocks trade or their liquidity, without adjustment for industry representation, and excluding companies incorporated outside the United States.
The index was market-value weighted; that is, movements in price of companies that have higher market values (share price times the number of outstanding shares) have a greater effect on the index than companies with smaller market values.
The index has since been converted to "float weighted"; that is, only shares which Standard & Poors determines are available for public trading ("float") are counted. The transition was made in two tranches, the first on
March 18, 2005and the second on September 16, 2005. (For example, only the Class A shares of Google ("GOOG") are publicly traded; thus, of the 207,096,000 total shares outstanding as of March 2006, only the 199,570,000 Class A shares were considered float, so only the value of the latter number of shares was used to incorporate Google into the S&P 500 on March 31, 2006.) Only a minority of companies in the index have this sort of public float lower than their total capitalization; for most companies in the index S&P considers all shares to be part of the public float and thus the capitalization used in the index calculation equals the market capitalization for those companies.
Apart from purchasing the individual stocks in the S&P 500, investors may also purchase shares of an
exchange-traded fund(ETF) which represents ownership in a portfolio of the equity securities that comprise the Standard & Poor's 500 Index. One of these ETF's is called the Standard & Poor's Depositary Receipts (SPDRs, pronounced "spiders"), and the ticker symbol is SPY. Typical volume for the SPDR is over 200 million shares per day—the highest of any US stock. There is also the iSharesS&P 500 (Symbol:IVV), which is similar to the SPDRs, but is structured differently. Rydex also offers an ETF, Rydex S&P Equal Weight (Symbol:RSP), which provides equal exposure to all the companies in the S&P 500.
The relatively compact units of these ETFs represent an opportunity for the smaller investor to achieve a performance close to the S&P 500 Index (minus fees and expenses). They trade like any other stock on the
American Stock Exchange, so they can be bought on margin, sold short, or held for the long term. Both the SPDRs and the iShares have a management expense ratio of under 0.1% a year, making them an efficient proxy for the underlying index.
mutual fundmanagers also provide index funds that track the S&P 500, the first of which was The Vanguard Group's fund|VFINX.
Chicago Mercantile Exchange(CME) offers futures and the Chicago Board Options Exchange(CBOE) offers options on the S&P 500 index. S&P futures can be traded on the exchange floor in an open outcry auction, or on CME's Globex platform, though only E-mini contracts are traded on Globex during regular trading hours.
These are the closing milestones of the S&P 500 in 100-point increments, along with the all-time highs.
Total annual returns
Total returns including reinvested dividends, in percent:
* [http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_500/2,3,2,2,0,0,0,0,0,0,0,0,0,0,0,0.html Overview of the S&P 500 from Standard & Poor's]
* [http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_500/2,3,2,2,0,0,0,0,0,2,3,0,0,0,0,0.html List of companies in the S&P 500]
* [http://www.indexarb.com/indexComponentWtsSP500.html List of S&P 500 companies by percentage weight]
* [http://www2.standardandpoors.com/spf/pdf/index/SP_500_Factsheet.pdf S&P 500 Fact Sheet] (PDF Format)
* [http://finance.yahoo.com/q/bc?s=^GSPC&t=my&z=l&q=l Logarithmic Chart of S&P 500 (1950-present) at Yahoo! Finance]
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