The S&P 500 Stock Market Index is a market-value-weighted index (the total outstanding shares are multiplied by its stock price), and is comprised of 500 large-cap companies traded on the New York Stock Exchange, the American Stock Exchange, and the NASDAQ. It is considered an important, and well-followed barometer for the American economy.
Henry Varnum Poor,
Unlike the Dow's 30 stock index, the S&P 500 has always represented a much broader economic picture of business in the United States, and with just as rich a history in the American financial culture as the Dow Jones Industrials.
The Early Years
Lawyer and Journalist Henry Varnum Poor publishes "The History of the Railroads and Canals of the United States" in 1860. Poor's work was the first-ever compilation of the booming railroad business, and its financial operations.
Henry V. Poor decided to go into business with his son Henry W. Poor. They formed "The H.V. and H.W. Poor, Co." in 1868. They published the "Manual of the Railroads of the United States". The "Manual" was updated yearly, and contained specific financial information of the US railroad industry. Railroads were a growth industry at that time, and investors could track a company's progress year-over-year with this information, and assess whether a specific company would return a worthy profit for its shareholders. The Manual sold for $5 per copy, and sold 2,500 copies in the first few months.
In 1873, Henry senior retires at age 61, but helps his son form an insurance and banking company called "Poor & Co.". The firm went on to be one of the leading banking and insurance institutions on Wall Street for more than 30 years.
Standard Statistics History
In 1906, Luther Lee Blake founded the "Standard Statistics Bureau". The company provided information on non-railroad companies. They provided information on 5"x7" cards, and the information was updated more frequently than just on a yearly basis.
By 1913 Blake bought out the "Babson Stock and Bond Card System" from Edward Shattuck and Roy W. Porter. The card system published financial reports on stocks and bonds, much like Standard Statistics did. A year later Blake incorporated Standard to be "Standard Statistics, Inc.". Standard was growing very rapidly - it employed more than 70 people in such a short time. Blake realized that there was a genuine need for consolidated, financial information.
Roy W. Porter aquires Moody's Manual Co.. Moody's also provides company financial information. Porter negotiationed to purchase the "Poor's Railroad Manual Co., which was the successor company to the H.V. and H.W. Poor Company.
Standard & Poor introduced their index in 1923. At that time, it was comprised of only 233 stocks, and covered 26 different industries. They introduced based-weighted aggregate techniques for calculating their average. Significantly more complex than a simple average calculation, as in the Dow Jones Industrial Average.
Introducted in 1926 was a Stock Composite Price Index made up of 90 stocks introduced by Standard Statistics. It was made up of 50 industrials, 20 railroad stocks, and 20 utility stocks. The index was updated daily, and even hourly. This was the first US-based stock index computed on a daily basis.
Before the great stock market crash of 1929, both Standard Statistics and the Poor's Publishing companies issued warnings to its clients that an impeding stock market correction was imminent. They had warned that the stock market had reached unsustainable levels.
The stock market crash hit many companies hard, including Poor's Publishing, which sent the company into bankruptcy. Paul T. Babson stepped in and funded the failing Poor's company, and with majority shareholdings, began rebuilding the company.
1941 was the year that Standard Statistics and Poor's Publishing merged into the Standard & Poor's Corporation known today. The original 233 stocks were increased to 416 stocks, which was comprised of 72 industry sub-groups.
Many people think of the Standard & Poor's as being only a stock index, but in 1941 they began a rating service - they released a Bond Guide that published quality ratings for 7,000 corporate bonds. They have been one of the largest corporate bond rating organizations ever since.
Today's version of the S&P500 Stock Index first began trading on March 4th, 1957, and after the Dow Jones Industrial Average, the S&P500 Index is the most watched indices in the world. The index was increased from 416 stocks to 500 issues, including 425 industrials, 60 utility stocks, and 15 railroad stocks.
At this point only New York Stock Exchange issues comprised the S&P500, but as of July 1st, 1976, S&P introduced the American Stock Exchange, and Over-The-Counter issues into the index. By 1986 the index's values were calculated every 15 seconds, as opposed to on a minute-by-minute basis.
In 2010, the S&P 500 Index now represents a total value of over $1 trillion dollars in company stock value. Standard & Poor has developed into a conglomerate of sub-organizations, employing thousands of people in dozens of cities across the globe.