Also known as the Standard and Poor’s 500, S&P 500 is an index of 500 of the biggest and most commonly owned stocks. The S&P 500 is commonly used as a representation of how the United States economy is doing as a whole.
The S&P 500 stocks more specifically are chosen based on their size, liquidity, and industry grouping, along with a few other factors. Tracking these 500 stocks allows the S&P 500 to reflect the risk and return of all companies with a market capitalization of over $5 billion. Market capitalization is the total worth of all the shares of stock that a corporation has distributed. As with most measurements within the stock market, the S&P 500 can be used as an indicator of how the US economy is doing.