What Is S&P Global?

What Is S&P Global?

Let me explain S&P Global directly: it's a financial powerhouse that creates indexes investors use to gauge market directions and sectors. It also issues credit ratings for companies and their bonds.

You probably know it best for the S&P 500 Index, which follows the 500 largest U.S. public companies and acts as a key indicator of stock market health. Many passive mutual funds and ETFs benchmark against these indexes.

The company's origins go back to the 1860s. For years it was called Standard & Poor's, but since 2016, its official name is S&P Global, and it trades publicly under the symbol SPGI.

Key Takeaways

Here's what you need to grasp: S&P Global leads in providing indexes and independent credit ratings. Its ratings arm assigns grades from AAA to D to companies, countries, and their debt, showing investment risk levels.

The S&P 500 is its flagship product, forming the basis for futures, mutual funds, and ETFs.

Understanding S&P Global

I want to walk you through the background: the company we knew as Standard & Poor's came from Poor's Publishing, founded in 1868 for railroad guides, and Standard Statistics Bureau from 1906 for company financial data.

Standard Statistics launched its first stock indicator with 233 companies in 1923, while Poor's issued its first rating in 1916. They merged in 1941 to form Standard & Poor's.

McGraw-Hill bought it in 1966. In 2012, it merged index operations with Dow Jones Indices to dominate stock indexes. By 2016, McGraw Hill Financial became S&P Global.

Today, divisions include S&P Global Ratings, Market Intelligence, Dow Jones Indices, and Platts. With over 1,500 analysts, it has issued more than a million ratings on governments, corporations, finance, and securities.

S&P researches credit risk across industries, benchmarks, assets, and regions. It rates debt from AAA to D for public and private entities, plus short-term debt and outlooks from six months to two years.

Important Competitors

Know this: S&P's main rivals in credit ratings are Moody's and Fitch, and for indices, it's Bloomberg.

S&P Global Indexes

The S&P 500 launched in 1957 as the first computer-generated, daily-published index. It and the Dow Jones Industrial Average represent the U.S. market overall.

It tracks prices of the 500 largest NYSE and Nasdaq stocks, measuring American company health—unlike the Dow's 30 selected stocks.

This index is the world's most popular equity benchmark for funds, ETFs, and securities. Other S&P indexes cover sectors: SmallCap 600, MidCap 400, Composite 1500, and 900, each tracking sub-sectors.

S&P 500 Index Futures

Futures on the S&P 500 started at CME in 1982, valued at $250 times the index. The E-mini came in 1997 at $50 times, broadening access, and the micro E-mini in 2019 at $5 times.

The 'E' means electronic, traded on CME Globex since 1997, not in pits. Traders prefer E-minis for size and liquidity; the standard contract was delisted in 2021.

Like all futures, you only front a margin fraction of value. This isn't like stock margins—it's 'skin in the game' to be settled.

S&P Underlying Ratings (SPURs)

SPURs give an opinion on a municipality's credit quality without guarantors or insurers. Public bonds often have enhancements for better terms via insurance or guarantees.

S&P issues SPURs only on request and monitors them if published.

Example of S&P Ratings

S&P ranks bonds and issuers by creditworthiness—the chance of default. Ratings use letters A to D, with plus/minus or numbers, like grades.

BBB and above are investment grade, safest. Below that is speculative, riskier. For short-term debt (under a year), ratings go A-1 to D, indicating strength to default.

What Does Standard and Poor's Mean?

S&P Global, once Standard & Poor's, is a top index provider and credit rater. The name from the 1941 merger of Poor's railroad prices (1860) and Standard Statistics (1906). 'The S&P' often means the S&P 500.

How Does S&P Make Money?

It earns fees from issuers for ratings, plus revenue from market intelligence, analysis, and research.

What Companies Are in the S&P 500?

It includes the 500 largest U.S. public companies like Microsoft, Apple, ExxonMobil, Bank of America, Visa, Coca-Cola. Requirements: at least 10% public shares, market cap of $14.6 billion minimum.

How Do I Find a Company's S&P Credit Rating?

Go to the S&P Global Ratings site, register for free, and search for the rating.

Is BBB Investment Grade?

Yes, BBB is investment grade, the lowest such from S&P. It means adequate protection, but economic changes could weaken commitment fulfillment.

The Bottom Line

S&P Global is a U.S.-based public company in financial info and analytics, offering research, indexes like the S&P 500 as market barometers, and credit ratings for companies, countries, and debt.