The S&P 500 Index

The Standard & Poor's 500 Stock Index (S&P 500) was created in the 1920s by the Standard and Poor's Corporation, and consists of 500 widely held companies traded on the New York and American stock exchanges and the over-the-counter (OTC) market. This index tracks companies in leading industries: transportation, utilities, financial services, technology, health care, energy, communications, services, capital goods, basic materials, consumer products, cyclicals and more.

Market-Weighted Index

The S&P 500 is market-weighted—that is, its component stocks are weighted according to the total market value of their outstanding shares. Because the impact of any single component's price change is therefore proportional to its overall market value, many professional market watchers believe the S&P 500 is a better general measure than the Dow.

Many consider the S&P 500 the most accurate reflection of the U.S. stock market today. This high regard has led many money managers and pension plan administrators to use it as a benchmark for judging the overall performance of their fund against the stock market.

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