S&P 500 gets new look as it shuffles some key companies

FILE- This Jan. 17, 2017, file photo, shows Netflix on a tablet, in North Andover, Mass. S&P Dow Jones Indices is shuffling the line-up of three of the 11 groups that make up the benchmark S&P 500 index. On Monday, 20 companies in the index including famous names like Facebook, Alphabet and Netflix will find a new home. (AP Photo/Elise Amendola, File)
FILE- In this May 18, 2012, file photo a television photographer shoots the sign outside of Facebook headquarters in Menlo Park, Calif. S&P Dow Jones Indices is shuffling the line-up of three of the 11 groups that make up the benchmark S&P 500 index. On Monday, 20 companies in the index including famous names like Facebook, Alphabet and Netflix will find a new home. (AP Photo/Paul Sakuma, File)

NEW YORK — It's almost moving day on the stock market.

The line-ups of three of the 11 groups that make up the benchmark S&P 500 index are being shuffled as of Monday. Twenty companies in the index including famous names like Facebook, Alphabet and Netflix will find a new home.

The most notable change will occur with the telecommunications group, currently the smallest piece of the market. It gets reinvented as communication services and grows from three to 19 companies, adding some key names from the technology and the consumer discretionary sectors.

The S&P's changes reflect the way the communications and media industries have evolved. AT&T and Verizon were once known as phone companies, but they're now media companies as well: AT&T just bought Time Warner, the parent of HBO and Warner Bros. movie studio, and Comcast bought NBCUniversal in 2013. Streaming services were a big reason for the telecom industry's shift, and now those companies will be in the same part of the market as Netflix.

The S&P index itself will still be made up of the same 500 companies, but the moves could change how investors think about them and how they approach the market. Analysts will help shape those views as they publish research on the new sector.

The stock market could become a bit more volatile since many ETFs and funds offer products that track the S&P 500's sectors. They'll make trades to match the changes in the S&P 500.

The three companies in the telecom group right now are AT&T, Verizon, and their smaller peer CenturyLink. Next week they'll be joined the new sector by some broadcasting and media companies, video game publishers and social media companies. Alphabet and Facebook are the most notable additions — their combined value of about $1.25 trillion will account for about half of the new sector's total value.

The old telecommunications sector has been considered a safe bet because AT&T and Verizon pay big dividends and their stocks tend to do well when the broader market declines. The new sector looks a bit riskier.

Sam Stovall, chief investment strategist for CFRA, said the new sector is characterized by "Very volatile or cyclical companies like Netflix (and) Facebook that are going to be very high growth oriented when the market is doing well, and could get absolutely slammed when the market goes down."

Consider that shares of Alphabet and Facebook have struggled since July. Netflix and Twitter — another company moving from tech — also suffered sharp declines over the summer as investors worried about their user growth and the possibility of new regulations affecting their earnings.

Stovall says utility companies and consumer goods makers will still act as defensive options for investors, but they'll have to be more selective in finding companies that offer protection in an economic slowdown.

Along with Alphabet, Facebook and Netflix, the communication services sector will include broadcasters like CBS and Discovery, cable and internet companies like Comcast, movie studios such as Disney and video game makers like Activision Blizzard. Stovall said the technology, consumer discretionary and communications sectors will be more "pure plays" after the move, meaning they will each be a bit more straightforward and focused on specific industries.

As they are currently comprised, the technology and consumer discretionary sectors are by far the best performing parts of the market. Both have risen about 30 percent over the last year. No other sector has risen even half that much, and the S&P 500 itself has gained 16 percent over the last 12 months. High-dividend companies have hardly moved over that time, and the telecom sector is up just 1.5 percent.

The technology sector will remain the biggest part of the stock market, although its share of the S&P 500 drops to 20 percent from 26 percent.

Microsoft and Apple will be the biggest companies in the sector by far. Other remaining technology companies will include chipmakers like Nvidia and Intel, software makers like Adobe, payment technology companies like Visa, hardware companies like NetApp and components makers like Oracle.

"Legacy hardware and semiconductor companies are just that, they're legacy," said Stovall. "Internet software and services, that's sort of the future."

About 60 companies will stay in the consumer discretionary sector, and Amazon, the largest company on the U.S. market after Apple, towers above the others. Home Depot, McDonald's and Nike will occupy more prominent positions in a sector that also includes hotels, restaurants and car companies. In a related move, payment company eBay will shift from technology into the consumer discretionary group.

You may also interested in

Gap offers muted outlook for annual earnings, lower profit

Aug 18, 2016

Gap offers a downbeat annual profit outlook after reporting a 43 percent drop in net income for the second quarter

Valeant, attempting to normalize operations, names new CFO

Aug 22, 2016

Valeant Pharmaceuticals is replacing Robert Rosiello as chief financial officer as the embattled pharmaceutical company attempts to normalize operations amid a host of ongoing investigations and class action suits

Delphi, Mobileye join forces on autonomous car platform

Aug 23, 2016

Auto parts and electronics company Delphi Automotive is joining with Israeli software maker Mobileye to develoDelphi and Mobileye plan to build a complete autonomous driving platformp the building blocks for a fully autonomous car in about two years

People also read these

Some vacation spots quietly benefit as travelers avoid Zika

Aug 23, 2016

Zika fears are leading some to book away from the Caribbean and Florida

AP NewsBreak: Feds want to ban swimming with Hawaii dolphins

Aug 24, 2016

Federal regulators are proposing a ban on swimming with dolphins in Hawaii

Auto, technology industries clash over talking cars

Aug 26, 2016

Automakers say cars that wirelessly talk to each other are finally ready for the road

Emporium Post fulfils the need to know all things about consumers and how businesses can take this opportunity to reach their own customers.

Contact us: sales@emporiumpost.com

Join our mailing list now!