S&P 500

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The S&P 500 is a stock market index containing the stocks of 500 mostly U.S. corporations. The index is the most notable of many indices owned and maintained by Standard & Poor's, a division of McGraw-Hill. S&P 500 also refers to the 500 companies whose stocks are included in the index.

The S&P 500 index forms part of the broader S&P 1500 and S&P Global 1200 stock market indices.

All of the stocks in the index are those of large publicly held companies and trade on major US stock exchanges such as the New York Stock Exchange and 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 bellwether for the US economy and is a component of the Index of Leading Indicators. It is often quoted using the symbol GSPC or SPX, and may be prefixed with a caret (^).

Many 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.

Contents 1 History 2 Selection 3 Weighting 4 Components 5 Investing 6 Closing Milestones 7 See also 8 References and Footnotes 9 External links

[edit] History

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 possible thanks to advances in computers, which could now calculate and disseminate the index in real-time. (See Detailed Timeline.)

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 bubble and bust) and generally less volatile "value" stocks; it also includes stocks from both the NASDAQ stock market and the NYSE. The index, near the height of the bubble, reached an all-time closing high of 1,527.46, and intra-day high of 1,553.11, on March 24, 2000. After that, the index eventually lost approximately 50% of its value, spiking below 800 in July 2002 and reaching a bear market low of 768.63 intra-day on October 10, 2002. Since then, the US stock markets have gradually recovered. However, during the week of October 2, 2006, when the DJIA set new record highs for the first time in nearly seven years, the S&P 500 remained below its all-time closing high. As of late 2006, the S&P 500 remains below its all-time high, although it established a monthly close above 1400 points for the first time in over six years on November 30, 2006.

[edit] Selection

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.

Although the index includes many large companies in the US, it is not simply a list of the 500 biggest companies, and includes a handful (11 as of September 19, 2006) that are incorporated outside of the US and are therefore technically not US companies. The companies are carefully selected to ensure that they are representative of various industries in the US 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 liquidity are not in the index. By contrast, the Fortune 500 attempts to list the 500 largest 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 US.

[edit] Weighting

The index was previously market-value weighted; that is, movements in price of companies whose total market valuation (share price times the number of outstanding shares) is larger will have a greater effect on the index than companies whose market valuation is smaller.

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, 2005 and 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 Class A shares outstanding as of March 2006, only 199,570,000 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 calcualtion equals the market capitalization for those companies.

[edit] Components

see List of S&P 500 companies

[edit] Investing

Apart from investing in the individual stocks in the S&P 500, there is also the possibility to invest in an exchange-traded fund (ETF) which represents ownership in a portfolio of the equity securities that comprise the Standard & Poor's 500 Composite Stock Price Index. This ETF is called the Standard & Poor's Depositary Receipts (SPDRs, pronounced "spiders"), and the ticker symbol is SPY. Typical volume for the SPDR is over 42 million shares per day, second only to QQQQ. There is also the smaller, newer iShares S&P 500 (Symbol:IVV), which has a slightly lower expense ratio, but is otherwise identical to the SPDRs. 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 AMEX, so they can be bought on margin, sold short, or held for the long term.

Several mutual fund managers also provide index funds that track the S&P 500. Notable among them is The Vanguard Group's (fund: VFINX) .

Additionally, the Chicago Mercantile Exchange (CME) offers futures contracts 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 during regular trading hours.

[edit] Closing Milestones

These are the closing milestones of the S&P 500 in 100-point increments.

Milestone	Closing Level	Date
100	100.38	June 4, 1968
200	201.41	November 21, 1985
300	301.16	March 23, 1987
400	404.84	December 26, 1991
500	500.97	March 24, 1995
600	600.07	November 17, 1995
700	700.66	October 11, 1996
800	802.77	February 12, 1997
900	904.03	July 2, 1997
1000	1,001.27	February 2, 1998
1100	1,105.65	March 24, 1998
1200	1,202.84	December 21, 1998
1300	1,307.26	March 15, 1999
1400	1,403.28	July 9, 1999
1500	1,500.64	March 22, 2000

[edit] See also

• S&P 400
• S&P 600
• S&P 1500
• E-mini S&P
• Index fund
• Exchange-traded fund

[edit] References and Footnotes

[edit] External links

• Information about the S&P 500 from Standard & Poor's
• S&P 500 Fact Sheet (PDF Format)
• List of companies in the S&P 500 (Microsoft Excel Format)
• Chart of S&P 500 performance (1950-present)