US stocks look to rebound following Tuesday's sharp decline

Source Fxstreet
Feb 14, 2024 13:23
  • US stock index futures point to a positive opening on Wednesday.
  • Wall Street's main indexes suffered heavy losses on Tuesday.
  • Markets see a less than 50% probability of a Fed rate cut in May after January inflation data.

S&P 500 futures rise 0.54%, Dow Jones futures climb 0.32%, and Nasdaq futures gain 0.73%.

S&P 500 (SPX), Dow Jones (DJIA), and Nasdaq (IXIC) indexes closed on Tuesday with a 1.37% loss, a 1.35% drop, and a 1.80% fall, respectively.

What to know before stock market opens

  • All major sectors of the S&P 500 closed deep into negative territory on Tuesday. The Consumer Discretionary was the worst-performing S&P 500 sector, losing 1.96% on the day.  
  • Ecolab Inc. (ECL) climbed nearly 9%, ending at $221.18 as the top gainer on Tuesday. On the flip side, Moody's Corp tumbled 7.9% to end the day at $369.23 as the day's single worst performer.
  • The CBOE Volatility Index (VIX), Wall Street's fear gauge, rose nearly 14% to highlight risk aversion on Tuesday. Ahead of the opening bell on Wednesday, VIX is down more than 5%.
  • Inflation in the US, as measured by the change in the Consumer Price Index (CPI), softened to 3.1% on a yearly basis in January from 3.4% in December, the US Bureau of Labor Statistics (BLS) reported on Tuesday. This reading came in above the market expectation of 2.9%. The Core CPI, which excludes volatile food and energy prices, rose 3.9% in the same period, matching December's increase and surpassing analysts' estimate of 3.7%.
  • According to the CME FedWatch Tool, the probability of a Federal Reserve (Fed) rate cut in May declined toward 30% from nearly 55% ahead of the January inflation data.
  • Later in the week, January Retail Sales, Industrial Production and Producer Price Index (PPI) data will be featured in the US economic calendar.
  • On Tuesday, Coca-Cola Co. (KO) reported that revenue rose 7.4% to $10.95 billion from a year ago for the quarter ended in December, per Reuters. The company announced that the quarterly net income was $1.97 billion for that period and cited higher product prices and robust demand for the upbeat results.
  • Airbnb Inc. (ABNB) said after the closing bell on Tuesday that quarterly adjusted earnings were 76 cents per share in the quarter ended in December. The company’s revenue increased 16.6% to $2.22 billion from a year ago, but there was a quarterly loss of $349 million.
  • Cisco Systems Inc. (CSCO), Equinix Inc. (EQIX) and Occidental Petroleum Corp (OXY) are among the top companies that will report earnings after the closing bell on Wednesday.

S&P and Nasdaq futures are presented by CME e-minis and Dow Jones futures are presented by CBOT e-mini.

S&P 500 FAQs

What is the S&P 500?

The S&P 500 is a widely followed stock price index which measures the performance of 500 publicly owned companies, and is seen as a broad measure of the US stock market. Each company’s influence on the computation of the index 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 index has achieved impressive returns – $1.00 invested in 1970 would have yielded a return of almost $192.00 in 2022. The average annual return since its inception in 1957 has been 11.9%.

How are companies chosen to be included in the S&P 500?

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

How can I trade the S&P 500?

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 (CFD) to place bets on the direction of the price. In addition, that can buy into Index, Mutual and Exchange Traded Funds (ETF) 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 in the index and the Chicago Board of Options (CMOE) offers options as well as ETFs, inverse ETFs and leveraged ETFs.

What factors drive the S&P 500?

Many different factors drive the S&P 500 but mainly it is the aggregate performance of the component companies revealed in their quarterly and annual company earnings reports. US and global macroeconomic data also contributes as it impacts on investor sentiment, which if positive drives gains. The level of interest rates, set by the Federal Reserve (Fed), also influences the S&P 500 as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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