S&P Index

What is it? The Standard & Poors Corp. calculates a number of indexes designed to track daily changes in the entire market or a segment of it. S&P indexes are market-value weighted, which means that stock prices of the companies within an index are multiplied by the number of shares outstanding to calculate the index. Consequently, the largest companies have the greatest influence on an index?s movement. A Standard & Poors Corp. committee determines the actual companies that make up the S&P indexes. The best known Standard & Poor?s index is the S&P 500, a large-cap index of 500 widely held domestic stocks, designed to emulate the market as a whole. It is a popular benchmark for measuring portfolio performance and a model for a growing number of index mutual funds. The S&P 500 is divided into four industry groups: Industrials, Financial, Transportation, and Utilities. Standard & Poor?s tracks all four industry groups in separate indexes. By far the largest group is the Industrials with 376 companies in the S&P 500. Next is Financials with 72 banks, brokerages, and other financial services companies. Utilities has 41 companies, and Transportation has 11 airlines and other companies. Standard & Poor?s does not mandate the number of companies in each group, but all together they must add up to 500. Other S&P indexes include the MidCap 400, an index of 400 domestic companies with an average market capitalization of $2 billion, and the SmallCap 600, an index of 600 widely held companies with an average market capitalization of just over $500 million.

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