Home Forex Major indexes suffered heavy losses after US inflation data

Major indexes suffered heavy losses after US inflation data

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  • Major stock indexes traded deep in the negative on Tuesday.
  • Inflation in the US fell at a more modest pace than expected in January.
  • All major sectors of the S&P 500 suffered heavy losses at midday.

The S&P 500 (SPX) is down 1.10% at 4,966.7, the Dow Jones (DJIA) is down 0.62% at 38,555.27 and the Nasdaq (IXIC) is down 1.14% to trade at 15,761 .5 at the time of writing.

Related content

Break: US CPI inflation softens to 3.1% in January, versus 2.9% forecast.

News from the stock market

  • All major S&P 500 sectors remain deep in the negative for the first half of the session. The real estate sector and the utilities sector lose more than 2% as the worst performers.
  • Ecolab Inc. (ECL) is up more than 8% near $200 as the biggest gainer. On the other hand, shares of VF Corp. (VFC) and Hasbro Inc. (HAS) fell about 7%, the biggest decline to date.
  • The CBOE Volatility Index (.VIX), a gauge of Wall Street fear, rose more than 6% on the day after rising 7.7% on Monday.
  • Inflation in the US, as measured by the change in the consumer price index (CPI), eased to 3.1% year-on-year in January from 3.4% in December, the US Bureau of Labor Statistics (BLS) reported on Tuesday. The figure beat market expectations of 2.9%. Core CPI, which excludes volatile food and energy prices, rose 3.9% over the same period, matching December's increase and beating analysts' estimate of 3.7%.
  • The latest survey of consumer expectations by the Federal Reserve Bank of New York showed on Monday that US consumers' annual inflation expectations remained steady at 3%.
  • 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.
  • Airbnb Inc. ( ABNB ) and MGM Resorts International ( MGM ) are among the top companies to release earnings reports after the closing bell.
  • 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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