The S&P 500 Composite Stock Price Index

The Standard & Poor's 500 Composite Stock Price Index, known as the S&P 500, is recognized worldwide as the preeminent benchmark for U.S. stock market performance.  The S&P 500 does not contain the 500 largest stocks; rather, it contains leading companies from leading industries which may include relatively small companies.  The Index represents a broad cross-section of the U.S. equity market, including common stocks traded on the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market System.

S&P identifies important industry sectors within the U.S. equity market, approximates the relative importance of these sectors in terms of market capitalization and then allocates a representative sample of stocks within each sector to the S&P 500.  There are 11 economic sectors within the Index: Basic Materials, Capital Goods, Communication Services, Consumer Cyclicals, Consumer Staples, Energy, Financials, Health Care, Technology, Transportation and Utilities.  Further, each sector is divided into industry groups; there are currently more than 100 industry groups in the Index.

The following is a list of the 50 companies in the Index with the highest market capitalizations as of 9/30/97.  Keep in mind that since stock prices and number of shares outstanding are constantly changing, the 50 largest companies and their relative order may change.
 

History

The origins of the S&P 500 Index go back to 1923, when Standard & Poor's introduced a series of indices which included 233 companies and covered 26 industries.  The Index as it is now known was introduced in 1957.

In 1968 the Index became a component of the U.S. Department of Commerce's Index of Leading Economic Indicators.  Now published by the Conference Board as the Composite Index of Leading Indicators, that widely followed index is used to signal potential turning points in the U.S. economy.

S&P 

Distribution of the S&P Index

Automatic Data Processing (ADP) is the primary calculator and disseminates S&P 500 values every 15 seconds during the trading day.  Bridge Date is the backup calculator.  ADP also transmits Index values to the Chicago Mercantile Exchange, where S&P 500 futures trade, and the Chicago Board Options Exchange, home of S&P 500 options.  The exchanges in turn distribute the Index values to numerous quotation vendors.  This ensures the widest possible means of distribution.  The S&P 500 is reported daily in The Wall Street Journal, The New York Times, USA TODAY, and virtually every major regional and local newspaper in the U.S.

S&P Index Committee 

The S&P Index Committee is responsible for establishing Index policy.  The management of the S&P 500 Index is totally objective and independent from S&P's other business operations and interests.  Companies are not removed form or added to the Index because of anticipated future stock price performance.  Rather, they may be removed because of mergers, acquisitions, restructurings or bankruptcy filings.  The decision to add a company is based upon market value, economic sector, industry group representation, stock liquidity, ownership and operation/financial condition.  Minimizing turnover of the composition of the S&P 500 Index is a primary consideration.

Comparison to the Dow Jones Industrial Average

The Dow Jones Industrial Average is the oldest indicator and probably the most well-known gauge of the U.S. stock market performance.

The DJIA is composed of 30 large capitalization, blue-chip stocks and measures the performance of a relatively small sector of the market.  It is price weighted rather than capitalization weighted.  As a result, a $1 move of a given stock price has the same effect on the DJIA as a $1 move in any other stock price.

The S&P 500 Represented 70% of the total domestic U.S. equity market capitalization as of 9/30/97/  The S&P Super Composite 1500 Index, which is comprised of the S&P 500, S&P MidCap 400 and S&P SmallCap 600, represented 82%.

The Index is market value-weighted (shares outstanding times stock price); each company's influence on Index performance is directly proportional to its market value.  The daily Index values which are reported in the media are exclusive of dividend income, i.e., the reflect only price action of the underlying component stocks.  Standard & Poor's does, in fact, calculate a separate total return index which recognizes dividend reinvestment.  It is the total return which is generally cited when comparing Index performance against the performance of mutual funds or other investments.

While Standard & Poor's prides itself on the fact that the S&P 500 Index is the leading stock market index to which index-lined products and passively managed stock index funds are based, Standard & Poor's does not make any express or implied warranty as to the advisability of investing in securities generally or in S&P Index-linked products or the ability of the S&P 500 to track general stock market performance.  In keeping with the objectives employed by Standard & Poor's in the management of the S&P 500 Index, Standard & Poor's does not take the needs of licensees of the S&P 500 Index or investors in S&P Index-linked products into consideration in determine, composing or calculating the S&P 500 Index.

A leader in publishing equity indices, Standard & Poor's Equity Investor Services offers an entire family of domestic and international indices.  There is currently over $600 billion tied to the S&P 500 in index funds alone, as well as other index-linked products, including annuities, bonds, CD's derivative products, life policies and more.

For more information on Standard & Poor's, please browse the S&P web site: http://www.stockinfo.standardpoor.com
 
 

* Domestic common stocks traded in the United States, excluding ADRs, REITs, Limited Partnerships, Mutual Funds, preferred shares and warrants. (As of 9/30/97)
 

Source=S&P 500 Index Brochure

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