Shares of Dell Technologies (DELL) and Palantir (PLTR) are marching higher on news that the technology companies are being added to the benchmark S&P 500 index.
Dell’s stock is up 6% on the news and Palantir’s share price has risen 7%. A third company, insurer Erie Indemnity (ERIE), is also being added to the S&P 500 and its stock is up 2%.
The three stocks are being added to the leading U.S. index as part of a rebalancing that takes place on a regular basis.
Dell, Palantir and Erie Indemnity are replacing American Airlines (AAL), Etsy (ETSY) and Bio-Rad Laboratories (BIO), which are each being removed from the S&P 500.
American Airlines and Bio-Rad are being added to the S&P MidCap 400 index, while Etsy’s stock is being placed on the S&P SmallCap 600 index.
S&P Dow Jones Indices, which manages the S&P 500, said the changes will take effect ahead of trading on Sept. 23.
Stocks typically rise on news that they are being added to the S&P 500 as mutual funds and exchange-traded funds (ETFs) that track the index are forced to buy the shares.
Getting removed from the S&P 500 is a blow to companies, particularly American Airlines, which remains the largest airline in the world although its stock has languished since the pandemic.
Shares of American Airlines, Etsy and Bio-Rad are each down about 1% on news of their removal from the S&P 500.
S&P Dow Jones Indices said the latest rebalancing better reflects the market capitalizations required of the S&P 500.
The average market cap of companies listed on the S&P 500 index is currently $33.5 billion U.S. Palantir has a market cap of $67 billion U.S., while Dell is valued at $72 billion U.S.
American Airlines’ market cap, by contrast, has declined to only $7 billion U.S. as its share price has fallen 64% over the past five years.
