Standard & Poor's is performing some end-of-year cleanup on its benchmark index, the S&P 500 Index (SPX). My colleague Mark Fightmaster reported earlier that Visa (V) is set to replace Ciena Corp. (CIEN) on the widely watched market barometer, but that's not the only SPX development hitting Wall Street today. In fact, struggling insurance issue MBIA Inc. (MBI) is preparing to take its leave from the venerable index.
In a press release late Friday, Standard & Poor's explained that MBIA "currently ranks 500th in the index and is no longer representative of the S&P 500 index market cap space." The beaten-down insurance company will be replaced by Mead Johnson Nutrition (MJN), which is in the process of being spun off by Bristol-Myers Squibb (BMY).
All of these changes to the SPX will become effective after the close of trading on Friday, Dec. 18.
MBI was down more than 7% Monday morning as traders reacted to the news, but give the stock some credit for sticking it out this long. Ambac Financial (ABK), one of MBI's closest peers, was booted from the SPX roughly a year and a half ago -- and it's now in danger of being delisted from the New York Stock Exchange (NYSE), thanks to its low share price. Meanwhile, MBI is still holding steady above $3 per share.
Of course, let's not get too carried away with favorable comparisons. MBI has shed nearly 10% of its value year-to-date, sitting out a rally in the broader equities market. The stock has been consistently suppressed by resistance at its 10-month and 20-month moving averages, and additional pressure from its 10-week trendline is close at hand.
As a result of its lackluster performance, short sellers have amassed a sizable position against MBI. Short interest on the security jumped by roughly 20% during the past month, and these bearish bets now account for 16.4% of MBI's float.
Elizabeth Harrow is a senior equities analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.