This week, the S&P 500 will get three brand new members as part of the index's regular rebalancing.
What Happened? S&P Global Inc. SPGI has announced the following three stocks will be joining the S&P 500 this month:
- VICI Properties Inc. VICI
- Keurig Dr Pepper Inc. KDP
- ON Semiconductor Corp. ON
Vici will replace Cerner Corp. CERN, which has been acquired by Oracle Corporation ORCL. That change will take place on Wednesday, June 8.
Keurig Dr Pepper and ON Semi will replace Under Armour Inc. UA UAA and IPG Photonics Corp. IPGP in the S&P 500. Under Armour and IPG will both shift to the S&P 400 MidCap index. These changes will take place prior to the market open on Tuesday, June 21 to coincide with the S&P 500's quarterly rebalancing.
Related Link: 3 Reasons The S&P 500 May Avoid A June Swoon
Why It's Important: Shares of VICI, Keurig Dr Pepper and On Semi were all trading higher by more than 6% on Monday morning. Many funds track the S&P 500 and mimic its holdings, so a stock that's added to the index may experience some heavy institutional buying following the announcement.
S&P 500 stocks often have higher visibility on Wall Street and may even receive additional analyst coverage.
Benzinga's PreMarket Prep co-host Dennis Dick recently said the S&P 500 rebalancing can be a significant market catalyst.
“This is important because if you’re trading these stocks ... to understand that if they are going in or out, there’s going to be some wicked moves in them,” Dick said.
“Maybe that gets you to a target. Maybe that gets you out of something or into something. Maybe there’s some buying pressure that will get you out of your swing trade.”
Given the volatility associated with the rebalancing, Dick said traders should always pay attention to the stocks going in and out of major indices.
Benzinga's Take: Traders should watch out for extreme volatility in the specific stocks mentioned and in the SPDR S&P 500 SPY on the dates the new additions are added, particularly on the June 21 rebalancing day. Monday morning's big moves in the three newest S&P 500 members may only be a preview of what's to come later this month.
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