Home Forex Major indexes open unchanged ahead of key inflation data

Major indexes open unchanged ahead of key inflation data

by SuperiorInvest


S&P 500 futures are unchanged, Dow Jones futures are trading flat and Nasdaq futures are holding steady near last week's close.

The S&P 500 ( SPX ), Dow Jones ( DJIA ) and Nasdaq ( IXIC ) ended Friday up 0.57%, down 0.14% and up 1.25%.

What to know before the stock market opens

  • The Nasdaq Composite rose more than 2% last week and the S&P 500 posted gains for a fourth straight week to close at a record high above 5,000. The Dow Jones underperformed and was virtually unchanged for the week.
  • The US Bureau of Labor Statistics (BLS) said on Friday that it had revised the monthly Consumer Price Index (CPI) growth lower for December to 0.2% from 0.3%.
  • Dallas Federal Reserve (Fed) Bank President Lorie Logan said there is no urgency to cut interest rates. Logan acknowledged that there had been “enormous progress” in reducing inflation, but noted that she would like to see more evidence of inflation to confirm that the progress is sustainable.
  • The U.S. Labor Department reported that there were 218,000 initial jobless claims in the week ending Feb. 3, down from a revised 227,000 the previous week.
  • On Tuesday, the BLS will release CPI data for January. The overall annual CPI is forecast to rise by 3% annually, a more modest pace than December's 3.4%. Core CPI, which excludes volatile food and energy prices, is expected to rise 3.8%.
  • Arista Networks Inc. (ANET), Cadence Design Systems Inc. (DNS) and Waste Management Inc. ( WM ) is among the top companies to release earnings reports after the closing bell on Monday.
  • Later in the week, the US economic calendar will release January data on retail sales, industrial production and the producer price index (PPI).

Frequently asked questions about the S&P 500 index

The S&P 500 is a widely followed stock price index that measures the performance of 500 publicly held companies and is considered a broad measure of the US stock market. Each company's impact on the index calculation is weighted based on market capitalization. This is calculated by multiplying the number of publicly traded shares of the company by the share price. The S&P 500 has achieved impressive returns – $1.00 invested in 1970 would have returned nearly $192.00 in 2022. The average annual return since its inception in 1957 has been 11.9%.

Companies are selected by a committee, unlike some other indexes where they are included based on set rules. Still, it must meet certain eligibility criteria, the most important of which is a market capitalization that must be greater than or equal to $12.7 billion. Other criteria include liquidity, domicile, public trading, sector, financial viability, time publicly traded and industry representation in the United States economy. The nine largest companies in the index account for 27.8% of the index's market capitalization.

There are a number of ways to trade the S&P 500. Most retail brokers and spread betting platforms allow traders to use contracts for difference (CFDs) to bet on price direction. In addition, one can buy into index, mutual, and exchange-traded funds (ETFs) that track the price of the S&P 500. The most liquid of the ETFs is State Street Corporation's SPY. The Chicago Mercantile Exchange (CME) offers futures contracts on the index, and the Chicago Board of Options (CMOE) offers options as well as ETFs, inverse ETFs and leveraged ETFs.

The S&P 500 is driven by many different factors, but primarily the aggregate performance of individual companies as revealed in their quarterly and annual corporate earnings reports. US and global macroeconomic data also contribute as they impact investor sentiment, which when positive drives earnings. The level of interest rates set by the Federal Reserve System (Fed) also affects the S&P 500 because it affects the cost of borrowing, on which many companies are heavily dependent. Therefore, inflation can be a major driver, as well as other metrics that influence the Fed's decisions.

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