Which Companies Affect the Value of the S&P 500 Index?

The following is a 3rd party contribution

Index trading online enables traders to invest in major national indices such as the French CAC40, the German DAX30, and the British FTSE 100. The 3 major Wall Street stock indices are the DJIA (Dow Jones Industrial Average), the S&P 500 (Standard & Poor’s 500) and the Nasdaq.

The Dow usually gets most of the attention, but the S&P 500 is more important to traders and is generally considered the most representative of the U.S. economy, as it is made up of 500 leading companies.

Founded on March 4th, 1957, the S&P 500 represents about 80% of U.S. market capitalisation. It is the most accurate tool for investors to monitor the overall health of the U.S. economy and is widely accepted as the best gauge of large cap equities. Worldwide indices are highly correlated and U.S. markets are usually the leading indicators of global economic forces, with European and Asian markets often following their performance.

The S&P 500 is spread across 11 different sectors. Tech stocks dominate the index, representing about 23.2% of the total market cap. Following closely behind is the Healthcare sector at 13.9%, and Financials at 13.7%. Like many stock indices, the S&P 500 is capitalisation-weighted, meaning each stock has a different impact on the total value of the index. Companies with the largest market cap have the heaviest weightings. These include Apple, Microsoft, Facebook, Alphabet Inc., Berkshire Hathaway, JP Morgan Chase & Co, Amazon.com Inc., Johnson & Johnson, and Exxon Mobil Corp.

Indices provide a simple way to identify economic trends in a given country. When opening positions on the S&P 500, smart traders constantly monitor its constituent stocks, as their individual performance can have a strong influence on the index as a whole. This means that when large companies are doing well, the index will generally go up. If most of its listed companies are struggling, however, the index will tend to fall. The most important news affecting stocks are earning reports, scandals, product recalls, the launch and success of new products or services, and growth forecasts.

To stay updated on stock indices, sign up with regulated broker UFX.com and benefit from its cutting-edge platform, advanced charts, and professional trading tools. Be sure to keep an eye on the economic calendar, as these events can strongly influence the stock markets, especially Central Banks meetings (FED, ECB, BoJ, and BoE), as well as growth and inflation figures (GDP, CPI, and PCE).

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