You’re not the only one craving an autumn makeover.

Like switching out bathing suits for flannel, S&P Dow Jones Indices is elevating some companies to join the 500 club, while others are getting booted.

The index provider is adding software firm Palantir Technologies, tech company Dell, and insurance giant Erie Indemnity. Those companies will be replacing American Airlines, Etsy, and Bio-Rad Laboratories. The changes will take effect Monday, Sept. 23, S&P Dow Jones Indices said in a statement.

Palantir shares soared 14.08%, while Dell jumped 3.81%, while Erie shares popped before dropping 0.61% by the end of the day. On the flip side, shares of companies dropping out tend to fall, though American Airlines actually rose over 3% today. But Etsy fell 1.58%, while Bio-Rad dropped 2.01%.

While a company’s addition to the S&P 500 is a testament to its growth, investors are also anticipating a huge boon to the new member’s stocks when funds that track the S&P 500 buy shares of the newly added company. And passive ETFs are a lucrative customer: There’s $11.4 trillion in funds benchmarked by the S&P 500, and the new stocks will get a piece of that massive pie.

How exclusive is it, really?

Companies in the index should be US-based, profitable, and have a market value of at least $12.7 billion to be included. While the S&P 500 roughly tracks the largest US companies, S&P Dow Jones Indices doesn’t immediately add a new company once it crosses the top 500 threshold, so it can be an imperfect delineation.

And some prior qualifications meant that there were a few obvious behemoths not included in the index. Dell, which was previously the largest US company by market cap not included in the S&P 500 until now, was barred from inclusion for years because of a rule prohibiting companies with multiple share classes, but that was overturned. Dell was previously included in the index between 1996 and 2013, until Michael Dell took the firm private in 2013. Dell went public again in 2018.

While having a market cap that puts it among the top 500 largest companies is a pretty strong indicator a firm will eventually be added to the index, it can be harder to predict exactly who will be next in line before it’s announced. For example, KKR and CrowdStrike, which were added to the S&P 500 in June, skipped inclusion in the S&P MidCap 400 and went straight to the majors. Coinbase, Snowflake, Workday, and DoorDash are a few other firms analysts believe could be added next.

After the S&P 500 had its worst week of 2024 last week, maybe a fresh look is just what it needs.—LB

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🟢 What’s up

• Boeing went boing tk% after the beleaguered airplane maker reached a tentative agreement with the Machinists union to avoid a strike.
• Summit Therapeutics soared tk% after the pharma company announced the stunning results of its lung cancer treatment ivonescimab (say that name five times fast).
• JetBlue Airways rose tk% after a Bank of America analyst upgraded the company, citing the airline’s revenue-improvement initiatives.
• Cannabis stocks got high(er) after former President Donald Trump announced he’d be willing to relax Federal marijuana laws if he is re-elected.

What’s down

• Big Lots plummeted tk% after the discount retailer filed for bankruptcy and sold itself to a private equity firm. Big Lots? More like Big Loss, amirite?! (Credit to reader Chris C. for that terrible joke)
• Merck sank tk% after Summit Therapeutics (see above) announced that, as part of its late-stage trial results, its new drug ivonescimab outperformed Merck’s Keytruda.
• Alphabet fell tk% as the search behemoth’s antitrust trial began this afternoon.

Even though you swear you just got an upgrade, now is that wonderful time of year when you realize once again you’re still somehow five iPhones behind.

Apple’s annual iPhone launch event, this year dubbed “It’s Glowtime,” was held today, and all eyes were on the launch of the new iPhone 16.

Yes, you read that right: 16. The first iPhone came out in 2007, back when Superbad first premiered in theaters, the final book in the Harry Potter series was released, and the Spice Girls went on their 10-year reunion tour.

The event included the reveal of a host of new features for various Apple products—including a new, more affordable AirPod, plus health and safety updates to Apple Watches. But the real highlight for investors is the iPhone, which made up 58% of Apple’s total revenue in the first quarter of this year. Apple announced:

• The new iPhone 16 will cost $799, while the Plus will cost $899. The Pro version will run for $999, with the Pro Plus retailing for $1,999. Adjusted for inflation, these are relatively lower price increases from the prior newest iPhones.
• It’s 0.2 inches bigger than previous models, will come in new colors, and has a more advanced camera.
• New AI features include a more advanced and conversational Siri, and texting tools that will help draft messages.

Despite the undeniable charisma of Apple’s awkward employee presentations, AAPL stock tends to underperform the day of the new iPhone model, leading analysts to dub it a “sell the news” event. But despite historically dropping slightly the day of, Apple shares tend to outperform in the months following the event by an average of 3 basis points, according to Morgan Stanley research.

It’s the AiPhone now

But analysts argued that this year could defy the usual trend, given investor excitement about Apple’s integration of generative AI into the iPhone. 

“For the first time since the iPhone was launched 17 years ago, the key feature we expect to drive iPhone upgrades this cycle – Apple Intelligence – is software-related,” wrote Morgan Stanley analyst Erik W Woodring in a note about the event, in which he gave the stock an “overweight” rating and a price target of $273.

Bank of America analyst Wamsi Mohan concurred, explaining, “If Apple surprises with a compelling demo of Apple Intelligence/third party integrations or with any price increases, we could see the stock fare better than post past events.” He reiterated his “buy” rating and $256 price target.

What’s the big deal? AI features will not only make the new iPhone more compelling to consumers, but will drive what Wedbush’s Dan Ives noted will be Apple’s “biggest upgrade cycle in history.” In other words, thanks to its new features, iPhone users with old models will have to upgrade to use the phone’s full capabilities, driving sales higher. “We estimate that roughly 20% of consumers worldwide will ultimately access and interact with generative AI apps through the Apple ecosystem over the coming years,” Ives wrote in a note, in which he reiterated his “outperform” rating and a $220 price target.

Even if Apple’s announcements today failed to spark a rally, that’s OK—the gains from the iPhone will pan out over the next few weeks and months.—LB

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• Don’t buy the dip in tech stocks, at least until valuations stop looking so stretched, according to Bank of America.
• Here are the red flags the IRS is looking for in your tax returns as it clamps down on taxpayers of all shapes and sizes.
• RIP Red Lobster: This fantastic breakdown from the New York Times details the sordid all-you-can-eat mess that was the now-defunct business.
• 3D-printed houses could be the solution to the US real estate crisis. But first, Walmart has to figure the technology out.
• The SEC charged 7 publicly traded companies with violating whistleblower protections, including TransUnion and Acadia Healthcare.
• The game of chicken begins yet again: The US government could shut down in three weeks, which is never a good thing for the stock market.

• The NFIB Small Business Optimism Index may not get a lot of the spotlight, and usually doesn’t dictate the market’s next move. But with all eyes on the economy and the Federal Reserve’s reactions to any signs of a slowdown, it isn’t a bad idea to keep an eye on how small businesses, a key part of the overall economy, are faring.
• Also, while it’s not directly markets-related, the second presidential debate and the first one between former President Donald Trump and Vice President Kamala Harris tomorrow night will draw a lot of attention from investors hoping to glean insight into both nominees’ economic policies.

After the close

• GameStop (GME) always makes things interesting, and investors should expect plenty of volatility ahead of this earnings announcement as usual. Wall Street says this stock is overvalued, the company’s business model is old-fashioned, and it’s best to avoid the madness. Wall Street bettors have a different opinion, and if the last few years have taught us anything, it’s that fundamentals don’t matter when it comes to this stock. Consensus: -$0.08 EPS, $895.67 million in revenue.
• Petco Health and Wellness Co. (WOOF) has only trended down since the pet supplies retailer went public three years ago. But, a new CEO took the helm in July, and this earnings announcement will tell shareholders more about what to expect from Joel Anderson. He’s promised a turnaround, and the company has shown strong revenue growth for a while now, but until he gets expenses under control, Petco is going to the dogs. Consensus: -$0.02 EPS, $1.52 billion in revenue.