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Investing.com -- Block shares jumped as much as 9.8% in premarket trading on Monday after the fintech firm, led by Jack Dorsey, was announced to join the S&P 500 index.
Block will replace Hess (NYSE:HES) in the benchmark index following Chevron Corp. (NYSE:CVX)’s $53 billion acquisition of the energy producer. The changes will take effect before trading begins on July 23.
JPMorgan analyst Tien-Tsin Huang said Block’s inclusion in the index should drive net indexer demand of 54.2 million shares. The analyst reiterated an overweight rating on the stock and raised the price target to $90 from $60.
"Block deserves a higher multiple given recent momentum around product velocity and marketing efforts, and joining S&P 500 helps," Huang noted.
Inclusion in the benchmark index has become increasingly important for companies in a market dominated by passive investment funds. Conversely, removal from the index can negatively impact stock prices as passive investors must sell shares to realign with the S&P 500’s new composition.
Despite Monday’s gains, Block shares have fallen 14% year-to-date based on the last closing price.
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