- The S&P 500 is set to open at a new all-time high above 5,000.
- Alibaba, PayPal and Disney were among the major companies to report earnings this week.
- The energy sector was the best-performing major sector in the S&P 500 on Thursday.
S&P 500 futures rose 0.16%, Dow Jones futures were unchanged and Nasdaq futures gained 0.33%.
The S&P 500 (SPX), Dow Jones (DJIA) and Nasdaq (IXIC) closed on Thursday with gains of 0.06% and 0.06%, respectively. 0.13% and 0.24%.
What to know before the stock market opens
- The energy sector was the best-performing major sector in the S&P 500 on Thursday, rising 1.09% on the day. At the opposite extreme was the public services sector, which fell by 0.83%.
- Ralph Lauren Corp. (RL) and Monolithic Power Systems Inc. ( MPWR ) added over 10% to be among the top gainers on Thursday. Snap-on Inc. (SNA) lost 9.7% to close at its lowest level since early November at $266.03.
- 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.
- Federal Reserve Bank (Fed) Bank of Richmond President Thomas Barkin told Bloomberg on Thursday that the economic data was remarkable across the board, but noted that he was cautious about the accuracy of the year-end numbers.
- US data showed the goods and services deficit was $62.2 billion in December, up $0.3 billion from November’s $61.9 billion.
- The Federal Reserve (Fed) reported late Wednesday that consumers added $1.56 billion in additional borrowing, well below the $16 billion forecast and down sharply from $23.75 billion the previous month.
- In an interview with CNBC on Wednesday, Minneapolis Fed President Neel Kashkari argued that if the labor market continues to be strong, they may cut interest rates relatively slowly. “At this point, two to three rate cuts this year seem appropriate,” he added.
- Federal Reserve Board of Governors Adriana Kugler said Wednesday that she was pleased with the big progress in inflation, adding that she was optimistic that progress would continue. “Some measures of financial conditions have eased, but they remain relatively tight and consistent with continued inflation developments,” Kugler said.
Alibaba, PayPal and Disney reported earnings this week
- Shares of Pinterest tumbled after the close as the company reported revenue of $981 million versus expectations of $991 million. Revenue rose 12% year over year from $877.2 million a year earlier, while net income was $201 million, or 29 cents per share, up from $17.49 million, or 3 cents per share, a year ago.
- The Walt Disney Co. ( DIS ) reported quarterly revenue of $23.5 billion, slightly below market projections of $23.6 billion, according to Reuters. Disney’s board approved a $3 billion share buyback program for the current fiscal year and declared a dividend of 45 cents per share. “Our strong performance last quarter demonstrates that we have turned a corner and entered a new era of growth for our company,” Disney CEO Bob Iger said in a statement.
- PayPal Holdings Inc. ( PYPL ) said revenue rose 8.7% to $8.03 billion from a year ago, beating the market forecast of $7.87 billion. Quarterly adjusted earnings for the quarter ended in December were $1.48 per share and quarterly net income was $1.4 billion. “We’re doing a lot of things to drive change internally and externally,” CEO Alex Chriss said in a post-earnings conference call, according to Reuters. “However, nothing happens overnight. to scale and move the needle,” added Chriss.
- Alibaba Group Holdings Ltd. ( BABA ) reported 3Q adjusted net profit of RMB 47,951 million and 3Q revenue of RMB 260,348 million before Wednesday’s opening bell. In its earnings report, the company said the board approved a $25 billion increase in its share buyback program. “Our top priority is to restart the growth of our core businesses, e-commerce and cloud computing,” Alibaba told Reuters.
- Uber Technologies Inc. (UBER) reported 4th quarter net income of $1.4 billion and 4th quarter gross bookings of $37.6 billion. Net income for the period was $9.94 billion. “Uber’s platform benefits and disciplined investment in new growth opportunities led to record engagement and acceleration in gross bookings in the fourth quarter,” Chief Financial Officer Prashanth Mahendra-Rajah said, according to Reuters.
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, residency, 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.
