What Happened?
Shares of cloud monitoring software company Datadog (NASDAQ:DDOG) jumped 14.2% in the afternoon session after reports the company will be added to the S&P 500 index.
S&P Dow Jones Indices announced after the market closed on Wednesday that the cloud-monitoring and security platform will replace Juniper Networks, which was acquired by Hewlett Packard Enterprise. The change is scheduled to be effective before the market opens on July 9.
Inclusion in the S&P 500 is a significant milestone for a company, often leading to a surge in demand for its stock. This is because index funds and exchange-traded funds (ETFs) that track the S&P 500 are now required to purchase Datadog shares to align their holdings with the index's new composition. This automatic buying pressure from passive investment funds is a primary driver for the stock's sharp increase. The move also enhances the company's visibility and solidifies its position as a major player in the cloud observability space.
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What Is The Market Telling Us
Datadog’s shares are quite volatile and have had 16 moves greater than 5% over the last year. But moves this big are rare even for Datadog and indicate this news significantly impacted the market’s perception of the business.
Datadog is up 8% since the beginning of the year, and at $155.10 per share, it is trading close to its 52-week high of $168.65 from December 2024. Investors who bought $1,000 worth of Datadog’s shares 5 years ago would now be looking at an investment worth $1,744.
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