Standard & Poor’s—often abbreviated as S&P—is a globally recognized name in finance, but its unusual name often sparks curiosity. The answer lies in financial history. The company’s name originates from the 1941 merger of two independent financial data providers: Poor’s Publishing, founded by Henry Varnum Poor, and the Standard Statistics Bureau. This union created one of the most influential financial analytics and credit rating institutions in the world.
Today, S&P Global (SPGI) plays a critical role in shaping investment decisions through its indices, such as the S&P 500, and its independent credit ratings. But beyond the name, understanding what S&P measures, how it impacts markets, and who stands behind it offers deeper insight into the modern financial landscape.
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What Does Standard & Poor’s Measure?
At its core, Standard & Poor’s provides independent financial research, credit ratings, and market indices. One of its most widely followed benchmarks is the S&P 500, which tracks the market performance of 500 large-cap U.S. companies listed on major exchanges like the NYSE and Nasdaq.
The index is designed to reflect the overall health of the U.S. economy. By analyzing corporate earnings, market capitalization, and sector representation, S&P offers investors a snapshot of market trends and economic direction. In addition to equity indices, S&P Global Ratings evaluates the creditworthiness of governments, corporations, and financial instruments, helping investors assess risk and return.
What Is the S&P 500?
The S&P 500 Index is a market-capitalization-weighted index that includes 500 of the largest publicly traded companies in the United States. Unlike price-weighted indices such as the Dow Jones Industrial Average, the S&P 500 gives more influence to companies with higher market values.
To be included, firms must meet specific criteria related to liquidity, market cap, public float, and financial viability. A committee at S&P Dow Jones Indices—a joint venture majority-owned by S&P Global—selects and maintains the index components.
The S&P 500 is widely regarded as the best single gauge of large-cap U.S. equities and serves as a benchmark for trillions of dollars in managed assets, including mutual funds and ETFs.
How Is the S&P 500 Calculated?
The calculation involves several steps:
- Determine each company’s market capitalization by multiplying its current share price by the number of outstanding shares.
- Sum the market caps of all 500 companies to get the total index market cap.
- Divide by a proprietary divisor to produce a scaled index value that accounts for stock splits, dividends, and additions/removals.
This method ensures the index remains consistent over time despite structural changes in component companies.
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Who Created Standard & Poor’s?
The roots of S&P trace back to Henry Varnum Poor, a financial analyst who began publishing reports on railroad finances in 1860. His work laid the foundation for modern corporate financial analysis. Poor’s Publishing evolved into a trusted source of investment data.
In 1906, Luther Lee Blake founded the Standard Statistics Bureau, which compiled financial data on stocks and bonds. The 1941 merger between these two entities formed Standard & Poor’s Corporation, combining deep analytical tradition with broad statistical coverage.
Who Owns Standard & Poor’s?
Today, Standard & Poor’s operates under S&P Global Inc. (SPGI), a publicly traded company listed on the New York Stock Exchange under the ticker SPGI. S&P Global owns several key divisions:
- S&P Global Ratings – Provides credit ratings.
- S&P Global Market Intelligence – Offers data and analytics.
- S&P Dow Jones Indices – Manages indices including the S&P 500 and Dow Jones.
- S&P Global Commodity Insights – Covers energy and commodity markets.
While S&P Global is a public company, its influence extends across global financial systems due to its role in benchmarking and risk assessment.
Is Standard & Poor’s a Public Company?
Yes. S&P Global Inc. is a public company traded on the NYSE as SPGI and is itself a component of the S&P 500. It transitioned to public ownership long before its current form, with its stock first trading on February 14, 1929. The company adopted the “SPGI” ticker symbol in April 28, 2016, following its rebranding from McGraw Hill Financial.
What Are the Core Functions of S&P Global?
S&P Global generates revenue through:
- Subscription-based data services (63% of revenue).
- Credit rating fees from issuers.
- Licensing fees for index usage in ETFs and funds.
- Analytics and advisory services for corporate and government clients.
This diversified model creates stable cash flow and positions SPGI as a resilient player in financial services.
What Is an ETF?
An ETF (Exchange-Traded Fund) is an investment fund that trades on stock exchanges like individual stocks. Most ETFs track indices such as the S&P 500, offering investors diversified exposure with lower costs and greater liquidity than traditional mutual funds.
Frequently Asked Questions
Why is it called Standard & Poor?
The name comes from the merger of Standard Statistics Bureau and Poor’s Publishing in 1941. It honors both legacy brands in financial data analysis.
What is the highest bond rating assigned by S&P?
The highest credit rating from Standard & Poor’s is “AAA”, indicating exceptional creditworthiness and minimal risk of default.
Is BBB+ a good credit rating?
Yes. A rating of BBB- or higher is considered “investment grade,” meaning the issuer has adequate capacity to meet financial commitments. BBB+ suggests slightly stronger stability than the minimum threshold.
How is a bond rating determined?
S&P evaluates financial statements, debt levels, profitability ratios, industry conditions, management quality, and external support (e.g., government backing) to assign ratings.
Is BBB better than BB?
Yes. BBB-rated bonds are investment grade, while BB-rated bonds are speculative (“junk”). A downgrade from BBB to BB can trigger selling by institutional investors restricted to investment-grade assets.
What does “SD” mean in S&P credit ratings?
“SD” stands for Selective Default, assigned when an issuer defaults on a specific obligation but continues to service others.
What are Standard & Poor’s and Moody’s?
Both are among the “Big Three” credit rating agencies (alongside Fitch). They assess credit risk for bonds issued by governments and corporations worldwide. Their ratings influence borrowing costs and investor confidence.
Is investing in the S&P 500 a good idea?
Historically, yes. The S&P 500 has delivered average annual returns of about 10% over the long term, making it a cornerstone for retirement accounts and passive investing strategies.
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Final Thoughts
Standard & Poor’s may have an unconventional name, but its impact on global finance is undeniable. From shaping investment products like ETFs to guiding risk assessments through credit ratings, S&P remains integral to modern markets. Whether you're an investor monitoring the S&P 500 or evaluating bond risks using S&P ratings, understanding this institution enhances financial literacy and decision-making.
With stable revenue streams, global reach, and trusted analytics, S&P Global continues to be a leader in financial information services—proving that even a name born from a century-old merger can power tomorrow’s markets.