S&P Dow Jones Indices announced on Friday that four companies - data center equipment maker Vertiv, photonics product manufacturers Lumentum and Coherent, and telecom operator EchoStar - will be added to the S&P 500 index.
The S&P 500, broadly regarded as the benchmark for U.S. large-cap equities and tracked by trillions of dollars in index and exchange-traded funds, sees its membership closely monitored by investors because changes can drive substantial flows into and out of individual stocks.
The index provider said the changes will take effect before trading begins on March 23 as part of its scheduled quarterly rebalance.
Market reactions in extended and after-hours trading reflected the typical pattern when companies are named for inclusion. Vertiv shares rose nearly 6% in extended trading on the announcement, while EchoStar shares climbed about 4%. Lumentum and Coherent were last reported up 1.7% and 0.4%, respectively, after the bell.
Conversely, the four companies that will be removed from the S&P 500 - dating platform Match Group, managed care firm Molina Healthcare, food processor LambWeston and payroll software provider Paycom - experienced downward pressure following the changes. Paycom was last down 3% after the bell, Match Group declined 0.7%, and Molina Healthcare slipped marginally.
Index inclusion and exclusion often prompt mechanical trading by funds that replicate the S&P 500. When a stock is added, index-tracking funds typically buy shares to mirror the benchmark, which can elevate demand and improve liquidity for the newly included companies. When a stock is removed, those same funds may sell the shares to rebalance their portfolios, creating potential selling pressure for the excluded names.
These adjustments are part of the routine quarterly rebalance process conducted by S&P Dow Jones Indices and will be implemented ahead of the market open on March 23.