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The S&P 500 inclusion effect springboard is back in a big way

That temporary price bump had cooled throughout the 2010s — now it’s heating up again, per a new Goldman Sachs report.

7/24/25 10:48AM

It’s not unusual to see shares pop when a company is set to join the S&P 500, an index now linked to a staggering $20 trillion in global assets. Just last Friday, Block soared 10% after its inclusion was announced, while Datadog spiked 15% on similar news earlier this month.

Known as the “S&P 500 Index Effect,” this short-lived bump is fueled in part by fresh demand from $13 trillion worth of passive funds and ETFs tracking the benchmark, which are required to buy shares of newly added companies.

But over the past decade, this effect had been losing steam. According to a 2023 Harvard study, the average announcement day return for S&P 500 additions dropped from 9.4% in the 1990s to just 0.8% by the late 2010s — partially because markets got better at absorbing these shocks, and traders got better at predicting inclusions.

Now, though, a new Goldman Sachs analysis suggests the inclusion effect may be staging a comeback.

Since 2021, stocks newly added to the S&P 500 have outperformed the equal-weighted index by an average of 4 percentage points on the announcement day — with nearly three-quarters of those stocks beating the benchmark.

Source matters

One factor driving the revival is that fewer companies are migrating from the S&P MidCap 400 Index. Per Goldman’s estimate, stocks added from outside the S&P 400 have seen average relative gains of 5.3 pp since 2013, while those graduating from the midcap index actually dipped 0.4 pp.

Retail hype may also be adding fuel, with recent entrants like Coinbase, Super Micro Computer, Palantir, and Datadog already beloved by traders ahead of their debut — and tied to popular themes like AI or crypto.

So, which big names could be next in line for America’s flagship index?

Go Deeper: Datadog is now in the S&P 500. These big stocks still aren’t.

Tasha Matsumoto

17h

Stocks eke out a gain as inflation remains mild

The S&P 500, Nasdaq 100, and Russell 2000 all posted weekly gains.

CHICAGO, ILLINOIS - DECEMBER 23: Benny the Bull, the Chicago Bulls mascot, dresses as Santa Claus in the game against the Milwaukee Bucks during the second half at the United Center on December 23, 2024 in Chicago, Illinois

Luke Kawa19h

Microsoft is in talks to shift its custom chip business to Broadcom from Marvell, The Information reports

The Information’s profile of custom chip specialist Broadcom includes this tidbit:

“And now Microsoft is also in talks to design future chips with Broadcom, which would involve Microsoft switching its business from Marvell, another maker of custom chips, according to one person involved in the discussions.”

Shares of Marvell Technology briefly dipped into the red after this report hit the wires, but then pared that drop to trade modestly higher. The company codesigns the Maia line of ASICs for Microsoft that are custom-built for Azure. Microsoft is its second-biggest hyperscaler client, behind Amazon.

Marvell tumbled on a ho-hum earnings report earlier this week before going on to surge after CEO Matt Murphy offered a $10 billion revenue target for its upcoming fiscal year, which was above analysts’ expectations.

Perhaps this is a bit of Information fatigue, given how Microsoft was quick to deny a report from the outlet earlier this week about how the tech giant lowered its sales targets for AI products.

Luke Kawa19h

Memory stocks soar as AI supporting cast repairs damage from steep November declines

There’s not much rhyme or reason to it, but memory stocks are ending the week with a stellar showing.

Shares of high-bandwidth memory specialist Micron, hard disk drive sellers Seagate Technology Holdings and Western Digital, and flash memory company Sandisk are all rising today.

Three of these stocks dropped about 20% in November as credit risk seeping into AI and a downturn in speculative momentum stocks weighed on the theme, with Sandisk faring the worst.

Micron, Western Digital, and Seagate have all since rebounded strongly and are about 5% or less from reclaiming all-time highs, while Sandisk has made up the least ground.

While GPUs (and, more recently, TPUs) get most of the headlines, data centers also need a boatload of memory chips that store information and feed it to those processors.

Nia Warfield22h

Ulta soars as Q3 beat sparks flood of price target hikes

Ulta’s latest makeover is happening on Wall Street. Shares leapt Friday morning as analysts hiked their price targets after the beauty retailer topped Q3 estimates and raised its full-year outlook after the bell Thursday.

Earnings came in at $5.14 per share, handily beating analyst expectations of $4.64. Revenue also topped estimates at $2.86 billion, compared with the $2.72 billion expected. Ulta has benefited from resilient beauty spending, even as consumers pull back elsewhere and hunt more aggressively for discounts.

Ulta now expects full-year net sales of about $12.3 billion, up from a prior forecast of $12.0 billion to $12.1 billion. The retailer also lifted its earnings outlook to $25.20 to $25.50 per share, up from $23.85 to $24.30 previously. This marks Ulta’s second straight quarter of hiking its sales and profit forecast. Analysts are taking note:

Goldman Sachs maintained its “buy” rating and raised its price target to $642 from $584.
DA Davidson maintained its “buy” rating and raised its price target to $650 from $625.
JPMorgan maintained its “outperform” rating and raised its price target to $647 from $606.
Baird maintained its “outperform” rating and hiked its price target to $670 from $600.
Telsey Advisory maintained its “outperform” rating and raised its price target to $640 from $610.
Piper Sandler maintained its “outperform” rating and raised its price target to $615 from $590.
Canaccord Genuity maintained its “neutral” rating and raised its price target to $674 from $654.

Max Knoblauch24h

Southwest cuts its earnings outlook on lost revenue due to government shutdown

Another big four airline has put a price tag on the 43-day government shutdown.

Southwest Airlines on Friday said lower revenue due to a temporary decline in demand during the shutdown, together with higher fuel costs, will ding its annual earnings before interest and taxes by between $100 million and $300 million. The carrier lowered its full-year EBIT outlook to $500 million, down from a prior range of $600 million to $800 million.

According to Southwest’s filing, bookings have returned to previous expectations following the end of the shutdown. Its shares dipped down about 1% in premarket trading.

The carrier joins Delta Air Lines in assigning a cost to the government closure. Earlier this week, Delta said the shutdown would cost it $200 million in the fourth quarter.