S&P – Standard and Poor's (2022)

A complete overview of all Standard and Poor's products

Written byCFI Team

Updated February 12, 2022

What is Standard and Poor’s (S&P)?

Standard & Poor’s is an American financial intelligence company that operates as a division of S&P Global. S&P is a market leader in the provision of financial market analysis, particularly in the provision of benchmark and investable indices and credit ratings for companies and countries.

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S&P – Standard and Poor's (1)

The S&P Global division includes:

  1. Global Ratings
  2. Global Market Intelligence
  3. Dow Jones Indices
  4. Global Platts

To learn more, launch our free finance courses!

History of Standard and Poor’s

The origin of Standard and Poor’s began in 1860. Henry Varnum Poor published a book called “History of Railroads and Canals in the United States.” The book provided a comprehensive coverage of the operational and financial state of railroad companies in the U.S. In 1868, Henry Varnum Poor and Henry William Poor created “H.V and H.W. Poor Co.,” which published two guidebooks that were updated annually.

The Standard Statistics Company was established in 1906, providing financial information regarding non-railroad companies. The Standard Statistics Company published its firststock market indicator in 1923, based on 233 companies.

Standard & Poor’s came into being in 1941 when Poor’s Publishing and the Standard Statistics Bureau merged. It increased the number of companies on the basis of which the stock index was computed to 416.

Later in 1966, The McGraw Companies acquired Standard & Poor’s Corporation, now known as S&P Global, after it rebranded in 2016.

(Video) What is the S&P 500 -- Should you Invest in the S&P 500

Branches of Standard and Poor’s

The Standard and Poor’s Global division includes the following divisions:

1. Global Ratings

S&P Global Ratings is a market leader in the field of credit risk research. Global Ratings covers various industries, asset classes, geographies, and benchmarks for the benefit of multiple investors. As of 2016, it already issued 1.2 million credit ratings on corporations, securities, financial sectors, and governments and held rated debt worth $47.5 trillion.

What is the S&P Credit Rating Process?

The S&P Global Ratings credit rating process is as follows:

  1. Contract – The issuing company requests a credit rating and formalizes the request by signing an engagement letter.
  2. Pre-Evaluation – S&P Global Ratings creates a team of analysts who review all relevant information.
  3. Management Meeting – The analyst team meets the management team to discuss the information procured in step 2.
  4. Analysis –The information is evaluated by the analysts. On the basis of this analysis, a rating is proposed to the rating committee by the analyst team.
  5. Rating Committee – The rating committee votes on the credit rating, based on the recommendation of the analyst team after reviewing the same.
  6. Notification – The issuing company is provided with a pre-publishing rationale for the credit rating assigned to it so that the rationale can be fact-checked.
  7. Publication – A public rating is published in a press release and at www.standardandpoors.com
  8. Surveillance of Rated Issuers & Issues – Surveillance is carried out to update the credit rating to keep it relevant, i.e., to downgrade or upgrade the rating if required.
  9. Performance Review – S&P Global Ratings conducts studies to measure the performance and accuracy of their credit ratings. This process involves tracking transitions and default rates and measuring how much credit ratings have changed over a period of time.
  10. The performance review is used by various agencies to refine their analytical methods for forming ratings opinions. The performance review also allows individuals and investors to see the relative volatility/stability of credit ratings.

To learn more, launch our free finance courses!

2. Dow Jones Indices

S&P Dow Jones Indices isthe world’s largest source of indices and is used by various classes of investors to find global investment opportunities. In 2012, Standard & Poor’s merged its index operations with those of Dow Jones Indexes and thus created an absolute market leader in the industry.

S&P 500 Index

The S&P 500 index – the first stock market index to be published daily – was launched in 1957. It is a leading indicator of the health of the U.S. stock market, despite the fact that it only includes large-cap companies because it includes a large part of the total worth of publicly-traded American companies.

How is the S&P 500 Index Calculated?

The following steps are undertaken to calculate the S&P 500:

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Step 1: Selecting the companies – The S&P 500 index is based on 500 stocks belonging to companies that are considered to be leading indicators of the American equity market. It is a measure of the value of the shares belonging to the largest 500 companies (according to market capitalization) on the Nasdaq Composite/New York Stock Exchange.

The 500 companies on which the S&P 500 is based are chosen by the Index Committee. The Index Committee is comprised of economists and analysts employed by Standard & Poor’s. The companies are selected on the basis of:

  • Liquidity
  • Market size
  • industry

Step 2: Calculation – The formula for calculating the S&P 500 is as follows:

Index = Sum of the Adjusted or Weighted Market Cap of All S&P 500 Stocks / Index Divisor

Index divisor: The index divisor is a proprietary figure which has been developed by S&P’s. Multiple sources peg the index divisor at 8.9 billion. It ensures that the S&P index is not affected by non-economic factors. The index divisor is adjusted in the event of:

  1. Stock splits
  2. Special dividends
  3. Spinoffs

Adjusted/weighted market cap of all S&P 500 stocks: The adjusted market capitalization of each individual company is arrived at by using the following formula:

Weighting = Market Capitalization of Individual Component / Sum of the Market Capitalization of All S&P 500 Stocks

Advantages of the market-weighted methodology: The market-weighted methodology results in an index which presents a more representative picture of the overall economy than indices that assign an equal share to all companies or are price-weighted.

Drawbacks of the market-weighted methodology: The market-weighted methodology results in the mega-cap companies impacting the index in an outsized manner. Furthermore, this methodology hides the weaknesses and/or strengths of smaller companies if their performance diverges from the performance of the large-cap companies.

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How to Invest in Standard and Poor’s index?

It is difficult for investors to replicate the S&P 500 because a portfolio based on that index requires specific quantities of stock from 500 companies. It is easier to buy an index fund if an investor wishes to replicate the index. Popular index funds include:

  • Vanguard S&P 500 ETF
  • iShares S&P 500 Index ETF
  • SPDR S&P 500 ETF

To learn more, launch our free finance courses!

Other S&P indices

Other popular Standard & Poor’s indices include:

  • SmallCap 600: An index representing small-cap companies
  • MidCap 400: An index representing mid-cap companies
  • 900: Combines 500 and MidCap 400
  • Composite 1500: SmallCap 600, MidCap 400, and 500 are combined. They are then collectively calculated to arrive at the Composite 1500.

3. S&P Global Market Intelligence

S&P Global Market Intelligence provides high-quality industry data, financial data, news, analysis, and research to its client investors based on the client’s portfolio. Its clients include universities, corporations, government agencies, and investment professionals. The tools they provide help their clients:

  • Track the performance of their portfolios
  • Track the performance of certain sectors of the economy
  • Generate alpha
  • Understand industry dynamics
  • Find investment opportunities
  • Assess credit risk

To learn more, launch our free finance courses!

4. S&P Global Platts

S&P Global Platts was founded in 1909 and provides benchmark prices for, and information about, the energy and commodities markets. The segments covered by them include power, oil and gas, petrochemicals, agriculture, shipping, and metals. Their clients include:

  • Traders
  • Risk managers
  • Analysts
  • Purchasing agents
  • Exploration companies
  • Refiners
  • Miners
  • Utilities
  • Steel companies
  • Airlines
  • Auto manufacturers
  • Government agencies
  • Financial institutions
  • Lawyers
  • Engineers
  • Consultants
  • Asset managers

Learn More

Thank you for reading CFI’s guide on S&P – Standard and Poor’s. Find out more about equity investing by clicking on the following CFI articles:

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  • How to Read Stock Charts
  • Guide to Investing for Dummies
  • Finance Investing Books

FAQs

Is S&P Global the same as Standard and Poor's? ›

Standard & Poor's—officially, S&P Global—is a public company in the financial information and analytics business.

What is S&P stand for? ›

S&P 500, abbreviation of Standard and Poor's 500, in the United States, a stock market index that tracks 500 publicly traded domestic companies. It is considered by many investors to be the best overall measurement of American stock market performance.

Why does S&P stand for Standard and Poor? ›

Why Is It Called Standard and Poor's? The first S&P Index was launched in 1923 as a joint project by the Standard Statistical Bureau and Poor's Publishing. The original index covered 233 companies in 26 different industries. The two companies merged in 1941 to become Standard and Poor's.

What is S&P rating scale? ›

The scale runs from A-1 to D. An A-1 rating may be designated with a plus sign (+) to indicate that the issuer's commitment to meet its obligation is extremely strong. A-1, A-2, A-3 (from best quality to good quality but somewhat vulnerable to changing economic conditions).

What is the highest S&P rating? ›

Table 1. An obligation rated 'AAA' has the highest rating assigned by S&P Global Ratings. The obligor's capacity to meet its financial commitments on the obligation is extremely strong.

Who is S&P owned by? ›

The S&P 500 is maintained by S&P Dow Jones Indices, a joint venture majority-owned by S&P Global, and its components are selected by a committee.

How many stocks are in the S&P 500? ›

The S&P 500 consists of 500 companies that issue a total of 505 stocks, as some companies, such as Berkshire Hathaway, have issued multiple classes of shares. The top 10 largest holdings are listed on the official S&P Global website.

How do I buy S&P 500 stock? ›

If you want an inexpensive way to invest in S&P 500 ETFs, you can gain exposure through discount brokers. These financial professionals offer commission-free trading on all passive ETF products. But keep in mind that some brokers may impose minimum investment requirements.

Why is the S&P 500 important? ›

The S&P 500 is largely considered an essential benchmark index for the U.S. stock market. Composed of 500 large-cap companies across a breadth of industry sectors, the index captures the pulse of the American corporate economy.

Why is it called S&P? ›

The S&P 500, which is short for Standard & Poor's 500, was introduced in 1957 as a stock market index to track the value of 500 corporations that have their stocks listed on the New York Stock Exchange (NYSE) and the NASDAQ Composite.

What is the highest the S&P 500 has ever been? ›

Price index
CategoryAll-time highsAll-time lows
Closing4,796.5616.66
Intraday4,818.6216.66

Is the S and P 500 a good investment? ›

S&P 500 ETFs are fantastic long-term investments. Despite facing dozens of downturns over the years, the index itself has historically earned positive average returns over time. In other words, though it will have good years and bad years, those ups and downs will average out over the long run.

What is S&P rating a 1? ›

A-1 An obligor rated 'A-1' has strong capacity to meet its financial commitments. It is rated in the highest category by S&P Global Ratings. Within this category, certain obligors are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitments is extremely strong.

Are S&P ratings public? ›

Our Credit Ratings are provided for distribution to public or private markets or, where applicable, available for internal (confidential) management use only.

Does S&P rate private companies? ›

As a credit rating agency (CRA), the company issues credit ratings for the debt of public and private companies, and other public borrowers such as governments and governmental entities.

Why is it called Dow Jones? ›

Why Is It Called Dow Jones? The Dow Jones Industrial Average is called the Dow Jones because it was developed by Charles Dow and Edward Jones at Dow Jones & Company.

What does Nasdaq stand for? ›

Its name was originally an acronym for "National Association of Securities Dealers Automated Quotations"—Nasdaq started as a subsidiary of the National Association of Securities Dealers (NASD), now known as the Financial Industry Regulatory Authority (FINRA).

How often are S&P ratings updated? ›

The rating is typically reviewed and restated quarterly, with a full analysis provided annually for higher volume issuers. The three main credit rating agencies are Moody's, Standard and Poor's, and Fitch Ratings.

Who created S&P 500? ›

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

What makes up S&P 500? ›

The S&P 500 stock market index is maintained by S&P Dow Jones Indices. It comprises 503 common stocks which are issued by 500 large-cap companies traded on American stock exchanges (including the 30 companies that compose the Dow Jones Industrial Average).

When was S&P founded? ›

Is Coca Cola part of S&P 500? ›

The S&P 500 index consists of most but not all of the largest companies in the United States. The S&P market cap is 70 to 80% of the total US stock market capitalization.
...
Components of the S&P 500.
CompanyCoca-Cola Company
SymbolKO
Weight0.729976
Price58.60
Chg-0.66
66 more columns

Is Amazon part of the S&P 500? ›

Amazon is, of course, part of the S&P 500, which is an index of the 500 largest U.S. companies by market cap.

Does S&P 500 give dividends? ›

S&P Global has paid a dividend each year since 1937. The current annualized rate is $3.08 per share and was declared on January 27, 2022.

What is the minimum investment for S&P 500? ›

Schwab S&P 500 Index Fund (SWPPX)

Launched in 1997, this Schwab fund charges a scant 0.02% expense ratio and requires no minimum investment, making it attractive for investors concerned about costs.

How much does it cost to invest in S&P 500? ›

SPDR S&P 500 ETF Trust (SPY)

The fund is sponsored by State Street Global Advisors — another heavyweight in the industry — and it tracks the S&P 500. Expense ratio: 0.095 percent. That means every $10,000 invested would cost $9.50 annually.

What's better index fund or ETF? ›

The main difference between index funds and ETFs is that index funds can only be traded at the end of the trading day whereas ETFs can be traded throughout the day. ETFs may also have lower minimum investments and be more tax-efficient than most index funds.

What is the difference between S&P and Dow? ›

The DJIA tracks the stock prices of 30 of the biggest American companies. The S&P 500 tracks 500 large-cap American stocks. Both offer a big-picture view of the state of the stock markets in general.

How is the Dow different than the S&P 500? ›

A key difference between The Dow and the S&P 500 is the method used to weight the constituent stocks of each index. The Dow is price-weighted. This means that price changes in the highest-priced stocks have greater impact on the index level than price changes in the lower-priced stocks.

Which country is Nasdaq? ›

The Nasdaq Stock Market (/ˈnæzdæk/ ( listen)) (National Association of Securities Dealers Automated Quotations Stock Market) is an American stock exchange based in New York City.

How much has the S&P 500 dropped in 2022? ›

U.S. stocks, as measured by the benchmark S&P 500 index, officially fell into “bear market” territory in June 2022. This represents a decline that exceeds 20% of the peak value of the index.

Are we in a bear market? ›

The bear market in the S&P 500 was confirmed on June 13th 2022, but the market began its slide on January 3rd 2022. With this date as the start of the current official bear market, the average bear market of 289 days means that it would finish on 19th October 2022.

Will S&P 500 continue to grow? ›

Strategists in the latest Reuters poll expected the S&P 500 to continue to rise in 2023, and hit 4,408 by mid-year, according to the poll's median forecast.

Where will the S&P 500 be at the end of 2022? ›

Sept 23 (Reuters) - Goldman Sachs has cut its year-end 2022 target for the benchmark S&P 500 (.SPX) index by about 16% to 3,600 points, as the U.S. Federal Reserve shows little signs of stepping back from its aggressive rate-hike stance.

How much would $8000 invested in the S&P 500 in 1980 be worth today? ›

Value of $8,000 from 1980 to 2022

$8,000 in 1980 is equivalent in purchasing power to about $28,754.47 today, an increase of $20,754.47 over 42 years. The dollar had an average inflation rate of 3.09% per year between 1980 and today, producing a cumulative price increase of 259.43%.

Does money double every 7 years? ›

According to Standard and Poor's, the average annualized return of the S&P index, which later became the S&P 500, from 1926 to 2020 was 10%.  At 10%, you could double your initial investment every seven years (72 divided by 10).

What is S&P 500 10 year return? ›

S&P 500 10 Year Return is at 181.2%, compared to 199.4% last month and 271.0% last year. This is higher than the long term average of 110.9%.

Which rating is better A+ or AA? ›

The first rating is a AAA while the second highest is AA. This is followed by an A-rating. Anything that falls in the A-class is considered to be high quality, which means the debt issuer has a very strong likelihood of meeting its financial obligations.

What is P rating? ›

P and R anti-slip ratings are listed according to the type of slip testing the material has been subjected to. The 'P' rating scale is from P0 to P5 according to the Wet Pendulum Test (P is for Pendulum). P5 is the highest rating possible (lowest risk of slipping).

What does B credit rating mean? ›

B' ratings indicate that material default risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is vulnerable to deterioration in the business and economic environment.

Why do credit ratings exist? ›

Credit ratings provide retail and institutional investors with information that assists them in determining whether issuers of bonds and other debt instruments and fixed-income securities will be able to meet their obligations.

How does S and P Global make money? ›

The company derives its revenues from a mix of subscription fees, as well as various corporate, insurance, and government clients around the world. About 63% of the company's sales are in the form of recurring subscription revenue, creating highly stable cash flow.

Who has a AAA bond rating? ›

AAA ratings are given to government debt and companies' corporate bonds. The global credit crisis of 2008 resulted in a number of companies losing their AAA rating, most notably, General Electric. 1 And as of September 2022, only two companies held the AAA rating outright—Microsoft (MSFT) and Johnson & Johnson (JNJ).

Why is S&P called Standard and Poor? ›

Standard & Poor's (S&P) is a company, a leading index provider, and data source of independent credit ratings. The name comes from the 1941 merger of two financial data publications. Henry Varnum Poor's publication on railroad prices (dating back to 1860), and The Standard Statistics Bureau, which was founded in 1906.

What is S&P stand for? ›

S&P 500, abbreviation of Standard and Poor's 500, in the United States, a stock market index that tracks 500 publicly traded domestic companies. It is considered by many investors to be the best overall measurement of American stock market performance.

What is S&P slang? ›

"Salt and Pepper" is the most common definition for S&P on Snapchat, WhatsApp, Facebook, Twitter, Instagram, and TikTok. S&P. Definition: Salt and Pepper.

Is there a global S&P 500? ›

Why is the S&P 500® Relevant Globally? S&P Global. On February 28, 2022, S&P Global completed its merger with IHS Markit, the next step in delivering data, technology and expertise that accelerates progress. As great as last year was for our company, in many ways 2022 is shaping up to be even better.

Is S&P Global a Fortune 500 company? ›

The company also owns a majority stake in the S&P Dow Jones Indices. Therefore, these two companies on the Fortune 500 list are not fully comparable. Moody's rank is 500, S&P Global's rank is 393.

Is S&P Global a good company? ›

S&P Global is recognized among India's Best Companies to Work For 2022 - Rank 67. Every year, Great Place to Work® identifies India's 100 Best Companies to Work For (with employee strength more than 500) through an objective and rigorous workplace culture assessment process.

What is the S&P Global 100 index? ›

The S&P Global 100 Index measures the performance of multi-national, blue chip companies of major importance in the global equity markets. With 100 highly liquid constituents, the index is designed to support low-cost index investment products.

Why is the S&P 500 so important? ›

The S&P 500 is largely considered an essential benchmark index for the U.S. stock market. Composed of 500 large-cap companies across a breadth of industry sectors, the index captures the pulse of the American corporate economy.

Is Nasdaq better than S&P? ›

The S&P 500 is considered a better reflection of the market's performance across all sectors compared to the Nasdaq Composite and the Dow. The downside to having more sectors included in the index is that the S&P 500 tends to be more volatile than the Dow.

Why is it called Dow Jones? ›

Why Is It Called Dow Jones? The Dow Jones Industrial Average is called the Dow Jones because it was developed by Charles Dow and Edward Jones at Dow Jones & Company.

What is the difference between Fortune 500 and S&P 500? ›

The Fortune 500 is an annual list of the 500 largest companies, compiled by Fortune magazine, using the most recent revenue figures and includes public and private companies. The S&P 500 is an index of 500 public companies that are selected by the S&P Index Committee.

Is USA 500 the same as S&P 500? ›

The S&P 500 Index, also known as the Standard & Poor's 500 or the US500, is an American stock market index that tracks the performance of the top 500 companies listed on the Nasdaq Stock Market or the New York Stock Exchange.

Who is number 1 on the Fortune 500 list? ›

Walmart

Does S&P pay well? ›

S&P; Global pays an average salary of $97,242 per year or $46.75 per hour. S&P; Global pays those in the bottom 10 percent $60,000 a year, and the top 10 percent over $156,000. Salaries vary by department as well. Workers in the engineering department can earn an average of $105,995 per year.

Is working for S&P good? ›

Good company to work for with great culture and working environment. Growth opportunities are abundant and excellent opportunity to learn new skills and excel in the career.

Why do you want to join S&P? ›

S&P Global is more than just a place to work

It's a place to learn and grow, surrounded by the best and brightest. A place to challenge yourself and advance your career. If you're a pioneer or a thinker, there's a role for you to play in our mission to help accelerate progress in the world.

Is there a S&P 50 ETF? ›

The Invesco S&P 500® Top 50 ETF (Fund) is based on the S&P 500® Top 50 Index (Index). The Fund will invest at least 90% of its total assets in securities that comprise the Index. The Index is composed of 50 of the largest companies in the S&P 500® Index.

How do I invest in the SP 500 index fund? ›

The S&P 500 is a stock market index made up of about 500 publicly traded companies. You cannot directly invest in the index itself. You can buy individual stocks of companies in the S&P 500, or buy an S&P 500 index fund or ETF. Index funds typically carry less risk than individual stocks.

What is the market cap of S&P 500? ›

The S&P 500 has a market capitalization of $30.973 trillion dollars. The total market cap is calculated by summing the market capitalization of every company in the index. Each company's calculated market cap is based on the outstanding float share count.

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