S&P Dow Jones Indices, the entity overseeing the S&P 500 Index, has decided to incorporate two high-performing stocks into the index. This strategic move aims to increase the emphasis on the technology and consumer discretionary sectors while reducing the influence of the industrial and financial sectors.
Scheduled to take effect on March 18, this decision involves the inclusion of one of the current tech darlings and a well-regarded footwear retailer, which has recently captured the attention and favor of investors.
A stock with Nvidia-esque gains
Going into the S&P 500:
- Super Micro Computer (SMCI)
- Deckers Outdoor (DECK) .
Super Micro specializes in manufacturing top-tier servers utilized in artificial intelligence applications. The company’s stock has witnessed an extraordinary surge, boasting a remarkable 218.5% gain year-to-date as of last Friday, following an impressive 1,003% surge in 2023.
The upswing in shares can be attributed to the ascendancy of artificial intelligence, emerging as a pivotal force in computing, akin to the transformative impact witnessed during the rise of the World Wide Web.
Investor fervor surrounding AI has propelled Nvidia (NVDA) to secure the position of the third most valuable U.S. stock, amplifying share prices across other chip and equipment manufacturers integral to AI operations.
Nvidia’s shares have witnessed a substantial 66.2% surge this year, building on an impressive 239% climb in 2023, fueled by exceptional fourth-quarter earnings.
Deckers, known for crafting footwear and accessories tailored for the expanding outdoor enthusiast market, hails from Goleta, California. The company’s shares have ascended by 35.1% this year, following a robust 67.5% uptick in 2023.
In terms of the S&P 500’s composition, the information technology sector represented 29.8% of the index’s stock value as of the end of February, while consumer discretionary shares constituted 10.6% as of February 29.
Noteworthy changes are on the horizon as Super Micro and Deckers gear up to replace two longstanding S&P 500 members, marking their transition into components of the S&P Midcap 400 Index.These will become components of the S&P Midcap 400 Index:
- Appliance maker Whirlpool Corp. (WHR) , founded in 1911.
- Regional banking company Zions Bancorp (ZION) , founded in 1873.
S&P Dow Jones routinely includes or removes companies from its indexes in cases of mergers, bankruptcies, or adjustments necessitated by prevailing market conditions. This process reflects the ever-changing landscape of what it terms the “large-cap market space.”
The S&P 500 operates as a market-cap-weighted index, where the impact of a stock on the index is directly proportional to its market capitalization. In simpler terms, the larger the market capitalization, the more significant the influence of a stock on the index.
Companies with venerable histories
Whirlpool stands as a global household appliances manufacturer, boasting a rich history as the primary supplier to Sears, Roebuck & Co. before establishing its own brand. Presently, the company offers a diverse range of products under various brand names, including Maytag, KitchenAid, JennAir, and Amana.
However, its shares have encountered a dip of 12.3% this year, following a nearly 14% decline in 2023.
Zions Bancorp, initially an arm of the Church of Jesus Christ of Latter-Day Saints, was founded with Brigham Young as its first president. The church’s ties were severed in 1960, and the banking entity now operates independently with $87.2 billion in assets, spanning 11 western states, such as Utah, California, and Arizona.
Since 2023, Zions Bancorp’s shares have faced challenges, aligning with the broader trend affecting many regional banks due to concerns over problem loans, particularly in the real estate sector. The shares have witnessed an 11.6% decline this year, following a 10.8% drop in 2023.
Beyond alterations in the S&P 500, S&P Dow Jones has incorporated changes in its key indexes, including the addition of software maker Intuit (INTU) to the S&P 100 Index, replacing Exelon (EXC), the largest U.S. utility company by revenue. Notably, Exelon remains part of the S&P 500.
These adjustments by S&P Dow Jones impact several significant indexes, including the S&P 500, S&P 100, S&P 400 Index, and the S&P Smallcap Index.
