The US 500 Index, more commonly known as the S&P 500 Index, is one of the key stock market indices that reflects the performance of the 500 largest capitalization companies listed on U.S. stock exchanges. The SPX Index is also one of the most commonly used indicators to analyze the overall health and performance of the stock market as well as the U.S. economy.
The S&P 500 Index is maintained by S&P Dow Jones Indices, a division of S&P Global. The index is formed by weighting companies by market capitalization, which means that each individual company’s weight in the index is based on its total market value. A company’s market capitalization is formed by multiplying its share price by the total number of shares outstanding. With this approach, companies with more substantial capitalization get an advantage and, as a consequence, have a greater influence on the price movement of the index.
How Is the S&P 500 Index Form?
- Eligibility criteria. Companies are added to the S&P 500 index if they meet certain criteria. Among the main criteria are registration and operation in the United States, market capitalization above a certain threshold, sufficient liquidity, shares issued and compliance with certain financial viability and reporting requirements.
- Selection process.The S&P Dow Jones Indices Index Committee reviews eligible companies and selects a representative sample of 500 companies that best reflect the overall U.S. stock market and fit all of the evaluation criteria. It is important to note that the index is compiled with a balance of all sectors of the U.S. economy to better reflect the real situation in the U.S. economy.
- Weighting methodology.Once a company has been selected for the index, its importance in the index is determined based on its market capitalization. The greater the market capitalization of a company, the higher its weight in the index and the greater its influence on the overall price movement. This approach ensures that the performance of large companies has a greater impact on the index.
- Regular rebalancing. The S&P 500 Index is rebalanced periodically to maintain its representativeness and to reflect changes in the market and economy. Rebalancing occurs every quarter, but adjustments may be made on an exceptional basis if necessary or in the presence of force majeure. During rebalancing, companies may be added or removed from the index based on changes in their market value or compliance.
The US 500 Index is one of the most popular investment tools for investors and US market participants because it provides a broad and diversified view of US stock market performance. The S&P 500 also serves as a benchmark for measuring the returns of investment portfolios, evaluating the performance of mutual funds and exchange traded funds (ETFs), and analyzing the overall health of the U.S. economy.
The price of the US 500 Index (S&P 500) depends on many economic and corporate factors that affect the stock market and the stocks of the companies in the index.
What Affects the Price of the US 500?
- Macroeconomic indicators. Economic indicators such as GDP growth, inflation, unemployment, and interest rates have a significant impact on the price of the index and the companies in it. Positive data on economic growth and low unemployment can cause the price of the US 500 to rise and show the U.S. economy is growing, while negative data, rising unemployment, or a key Fed rate hike can cause the price of the index to fall.
- Fed policy.Decisions and comments by the U.S. Central Bank (Fed) regarding U.S. interest rates and monetary policy can affect the price of the US 500, as the decisions of this body directly affect investment processes and liquidity in the global economy. A decline in interest rates boosts corporate and SPX stock prices, while an increase can lead to falling prices and increased demand for protective assets.
- Corporate earnings. The financial results of companies in the index are an important factor affecting the price of the US 500. Positive reports on corporate earnings, innovation, and positive earnings forecasts can push the index up, while negative reports can cause the price to fall.
- Geopolitical events. Global political and economic events such as trade disputes, conflicts, elections and legislative changes can affect the price of the US 500. Uncertainty and instability in the geopolitical sphere can cause pessimism in the market and negatively affect the price of the index.
- International factors.World economic events, such as global financial crises, exchange rate changes and trade agreements, and the policies of the Central Banks of developed countries may affect the price of the US 500. Events in the global financial markets may cause a reaction in the US market and affect the actions of companies and, accordingly, the price of the S&P 500 Index.
As of the beginning of 2025, the S&P 500 index is in a bullish rally. The main reason for the growth of index quotations is the stability and development of the US economy, strong labor market, gradual easing of the Fed’s monetary policy and the rapid development of artificial intelligence technology, which allowed a number of companies, including Nvidia, AMD, Microsoft, Meta and others to significantly strengthen their positions in the global financial markets thanks to innovative products.