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Google stock jumps on news of S&P listing

Shares of search company climb 7.9 percent in morning trading, following announcement of its addition to S&P 500 index.

Google shares jumped 7.9 percent in morning trading Friday, following an announcement by Standard & Poor's that the search engine would be added to the S&P 500 Index.

Google, which has seen its stock more than double in the past year, will join the S&P Index on March 31, after the market's close. Investors are expected to cheer, given that index funds will be snapping up Google shares.

Bear Stearns analyst Robert Peck predicted that Google would rank within the top 30 companies in the index of blue-chip stocks. Joining the S&P 500 will lock up about 7 percent of Google's stock in index capital, "which we believe could effectively reduce the trading supply of the stock," Peck wrote in a research note Friday. "As supply decreases, the equilibrium price should increase."

Merrill Lynch analyst Lauren Fine said her firm was maintaining its "neutral" rating for Google. "We believe this news should give a nice boost to the stock, especially since its valuation is more attractive here," she wrote in a research note. "However, fundamentals pointing to tension between revenue growth and margins this year will likely keep the name trading in a range at least until the company reports its first quarter."

Shares of Google rose $26.99, or about 7.9 percent, to hit $368.88 in morning trading on the Nasdaq. The stock had traded down since reaching a record high of $471.63 in early January on the company's first earnings miss since going public in August 2004 and amid negative headlines about slowed growth going forward.

Google, which has outperformed the S&P in the past year, will replace Burlington Resources on the S&P 500.

CNET's Elinor Mills contributed to this report.