Linear graph of the S&P 500 index from 1949 to March 2007

Logarithmic graph of the S&P 500 index from 1950 to January 2008

Logarithmic graph of the S&P 500 index with simple trend lines

The S&P 500 stands for Standard & Poor 500 and is a free-float capitalization-weighted index published since 1957 of the prices of 500 large-cap common stocks actively traded in the United States. The stocks included in the S&P 500 are those of large publicly held companies that trade on either of the two largest American stock market exchanges: the New York Stock Exchange and the NASDAQ.^{[citation needed]}

The index focus is U.S.-based companies although there are a few companies with headquarters in and/or incorporated in other countries.^[1]

After the Dow Jones Industrial Average^{[citation needed]}, the S&P 500 is one of the most commonly followed equity indices, is considered a bellwether for the American economy, and is included in the Index of Leading Indicators. Many mutual funds, exchange-traded funds, and other funds such as pension funds, are designed to track the performance of the S&P 500 index. Hundreds of billions of US dollars have been invested in this fashion.

The index is the best known of the many indices owned and maintained by Standard & Poor's, a division of McGraw-Hill. S&P 500 refers not only to the index, but also to the 500 companies that have their common stock included in the index. The ticker symbol for the S&P 500 index varies. Some examples of the symbol are ^GSPC^[2],.INX^[3], and $SPX^[4]. The stocks included in the S&P 500 index are also part of the broader S&P 1500 and S&P Global 1200 stock market indices.

History [link]

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The index reached an all-time intraday high (which was not exceeded for over seven years) of 1,552.87 in trading on March 24, 2000, during the dot-com bubble, 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 during the stock market downturn of 2002. The S&P 500 remained below its year 2000 all-time high somewhat longer than the popular Dow Jones Industrial Average and the more comprehensive Wilshire 5000. However, 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. The highest point reached was 1,565.15 on October 9, 2007.

In mid-2007, difficulties stemming from subprime mortgage lending began spreading to the wider financial sector, resulting in the second bear market of the 21st century. The resulting crisis became acute in September 2008, ushering in a period of unusual volatility, encompassing record 100-point moves in both directions and reaching the highest levels since 1929.^[5] On November 20, 2008, the index closed at 752.44, its lowest close since early 1997.^[6] A modest recovery the following day still left the index down 45.5% for the year. This year-to-date loss was the greatest since 1931, when the broad market declined more than 50%;^[7] the total losses that ushered in the Great Depression exceeded 80% over a three-year period. The market continued to decline between late 2008 and early 2009 surrounding the events involving the financial crisis of 2008, reaching a nearly 13-year closing low at 676.53 on March 9. Subsequently, the index recovered sharply to close at 1,206.07 on December 1, 2010, up over 78% from the low but still down by more than 23% from the 2007 high; this respite has been alternately characterized as heralding a return to economic growth, or a significant counter-trend bear market rally. After a sharp summer correction of an early 150-point gain in 2011, the S&P 500 closed above 1,400 on March 15, 2012 at 1,402.60, its highest close since June 6, 2008 and only 0.03 from its intraday high. On April 2 ,2012 a intraday High of 1422.38 was reached. this was the highest leval since May 19 ,2008 when a intraday high of 1440.24 was reached and this was the highest in all of 2008.

Selection [link]

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 (14 as of April 3, 2012) of non-U.S. companies. This group includes both formerly U.S. companies that have reincorporated outside the United States, as well as firms that have never been incorporated in the United States.

The committee selects the companies in the S&P 500 so they are representative of the industries in the United States economy. In addition, companies that do not have common stock that trades publicly (such as limited partnerships and companies 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 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.

Components[link]

Versions [link]

The "S&P 500" generally quoted is a price return index; there are also "total return" and "net total return" versions of the index. These versions differ in how dividends are accounted for. The price return version does not account for dividends; it only captures the changes in the prices of the index components. The total return version reflects the effects of dividend reinvestment. Finally, the net total return version reflects the effects of dividend reinvestment after the deduction of withholding tax.^[8][9]

Weighting [link]

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The index has traditionally been market-value weighted; that is, movements in the prices of stocks with higher market capitalizations (the share price times the number of shares outstanding) have a greater effect on the index than companies with smaller market caps.

The index is now float weighted. That is, Standard & Poor's now calculates the market caps relevant to the index using only the number of shares (called "float") available for public trading. This transition was made in two steps, the first on March 18, 2005 and the second on September 16, 2005.

Index maintenance[link]

In order to keep the S&P 500 Index comparable across time, the index needs to take into account corporate actions such as stock splits, share issuance, dividends and restructuring events (such as merger or spinoffs). Additionally, in order to keep the Index reflective of American stocks, the constituent stocks need to be changed from time to time.

To prevent the value of the Index from changing merely as a result of corporate financial actions, all such actions affecting the market value of the Index require a Divisor adjustment. Also, when a company is dropped and replaced by another with a different market capitalization, the divisor needs to be adjusted in such a way that the value of the S&P 500 Index remains constant. All Divisor adjustments are made after the close of trading and after the calculation of the closing value of the S&P 500 Index.

Update frequency[link]

The index is updated every 15 seconds during trading sessions.

Investing [link]

Many index funds and exchange-traded funds attempt to replicate (before fees and expenses) the performance of the S&P 500 by holding the same stocks as the index, in the same proportions. Many other mutual funds are benchmarked to the S&P 500. Consequently, a company whose stock is added to the list of S&P 500 stocks may see its stock price rise, as the managers of index funds normally choose to purchase that company's stock in order to continue tracking the S&P 500 index. Several mutual fund managers also provide index funds that track the S&P 500, the first of which was The Vanguard Group's Vanguard 500 in 1976.^[10] Many retirement plans offer such funds. For example, the Thrift Savings Plan's C Fund tracks the total return S&P 500 index.

In addition to investing in a mutual fund indexed to 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; NYSE: SPY, originating from a chain of ETFs called the SPDRs, pronounced "spiders", and is issued by SSgA State Street Global Advisors. Typical volume for the SPY SPDR averages between 300-400 million shares per day; the highest of any US stock traded on any exchange.

On October 10, 2008, trading volume for the SPY SPDR surpassed 871 million shares; with a closing price of $88.50, the monetary value of traded shares which changed hands exceeded an astounding 77 billion dollars for the day.^[11] BlackRock offers the iShares S&P 500 NYSE: IVV, which is similar to the SPDRs, but is structured differently. 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, while achieving a performance close to the S&P 500 (minus fees and expenses).

Through RydexShares, fund manager Rydex also offers an ETF, the S&P Equal Weight NYSE: RSP, which provides equal exposure to all the companies in the S&P 500. In addition, Rydex offers other related S&P 500 index ETFs such as the 2x NYSE: RSU, which attempts to match the daily performance of the S&P 500 by 200% and the Inverse 2x NYSE: RSW, which attempts to match the inverse daily performance by 200%. More heavily traded ProShares issued by ProFunds offer Inverse Performance NYSE: SH for a bearish strategy on the index, Inverse 2x Performance NYSE: SDS, and 2x Performance NYSE: SSO. For additional leverage, ProFunds also offers 3x Performance NYSE: UPRO, which attempts to match the daily performance of the S&P 500 by 300% as well as Inverse 3x Performance NYSE: SPXU, which attempts to match the inverse daily performance of the S&P 500 by 300%.

In the derivatives market, the Chicago Mercantile Exchange (CME) offers futures contracts that track the index and trade on the exchange floor in an open outcry auction, or on CME's Globex platform, and are the exchange's most popular product. Additionally, the Chicago Board Options Exchange (CBOE) offers options on the S&P 500 as well as S&P 500 ETFs, inverse ETFs and leveraged ETFs.

Market statistics[link]

• (a) These are the closing milestones of the price return S&P 500 in 100-point increments, along with the all-time highs.
• (b) Total returns including reinvested dividends, in percent. In other words, these are the changes in the total return version of the index.

See also [link]

• S&P Completion
• Standard & Poor's
• List of S&P 500 companies
• Fortune 500
• FTSE 100
• S&P 400
• S&P 600
• S&P 1500
• S&P 100
• E-mini S&P
• Index fund
• Exchange-traded fund

References [link]

External links [link]

• CNN Money page for SPX
• Overview of the S&P 500 from Standard & Poor's
• S&P 500 Fact Sheet (PDF Format)
• Logarithmic Chart of S&P 500 (1950-present) at Yahoo! Finance