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    Stock Market Today: Futures trade marginally lower to start critical week

    Source Fxstreet
    Mar 4, 2024 10:46
    • US stock index futures trade marginally lower to start the week.
    • S&P 500 and Nasdaq Composite closed the previous at new all-time highs.
    • Fed Chairman Powell will testify before Congress later in the week.

    S&P 500 futures fall 0.12%, Dow Jones futures drop 0.21%, and Nasdaq futures are unchanged.

    S&P 500 (SPX), Dow Jones (DJIA), and Nasdaq (IXIC) indexes closed on Friday with a 0.80% gain, a 0.23% increase, and a 1.14% rise, respectively.

    What to know before stock market opens

    The Dow Jones Industrial Average (DJIA) closed the previous week virtually unchanged at 39,087.39, the S&P 500 (SPX) rose nearly 1% to close at a new all-time high of 5,137.07 and the Nasdaq Composite (IXIC) added over 1% to end at a record of 16,274.94.

    The Technology Sector climbed 1.78% on Friday, outperforming the rest of the major sectors, closely followed by the Energy Sector, which rose 1.17%. The Utilities Sector fell on Friday, ending the last day of the week down 0.72% at the closing bell.

    NetApp Inc. (NTAP) jumped 18.167% to close at $105.31 as the biggest gainer on Friday. On the other hand, Zscaler Inc. (ZS) backslid nearly 9.4% as the biggest loser for the day, dropping to $219.23.

    Assessing the latest developments in equity markets, “the S&P 500 gained +0.95% last week (and +0.80% on Friday), meaning the index has now recorded positive weekly gains for 16 out of the last 18 weeks, the first time since 1971,” noted Jim Reid, global head of economics and thematic research at Deutsche Bank, and continued:

    “Talking of milestones, the Russell 2000 reached its highest level since April 2022, jumping +2.96% on the week (and +1.05% on Friday), so the rally was fairly broad. But it was tech stocks that led Friday’s sizeable rally, with the Magnificent 7 up +1.27% (+1.74% over the week). A strong earnings beat by Dell Technologies (+31.62% Friday) lifted semiconductor stocks (+4.29%) and saw Nvidia (+4.00%) move above $2trn market cap for the first time.”

    Nasdaq FAQs

    What is the Nasdaq?

    The Nasdaq is a stock exchange based in the US that started out life as an electronic stock quotation machine. At first, the Nasdaq only provided quotations for over-the-counter (OTC) stocks but later it became an exchange too. By 1991, the Nasdaq had grown to account for 46% of the entire US securities’ market. In 1998, it became the first stock exchange in the US to provide online trading. The Nasdaq also produces several indices, the most comprehensive of which is the Nasdaq Composite representing all 2,500-plus stocks on the Nasdaq, and the Nasdaq 100.

    What is the Nasdaq 100?

    The Nasdaq 100 is a large-cap index made up of 100 non-financial companies from the Nasdaq stock exchange. Although it only includes a fraction of the thousands of stocks in the Nasdaq, it accounts for over 90% of the movement. The influence of each company on the index is market-cap weighted. The Nasdaq 100 includes companies with a significant focus on technology although it also encompasses companies from other industries and from outside the US. The average annual return of the Nasdaq 100 has been 17.23% since 1986.

    How can I trade the Nasdaq 100?

    There are a number of ways to trade the Nasdaq 100. Most retail brokers and spread betting platforms offer bets using Contracts for Difference (CFD). For longer-term investors, Exchange-Traded Funds (ETFs) trade like shares that mimic the movement of the index without the investor needing to buy all 100 constituent companies. An example ETF is the Invesco QQQ Trust (QQQ). Nasdaq 100 futures contracts allow traders to speculate on the future direction of the index. Options provide the right, but not the obligation, to buy or sell the Nasdaq 100 at a specific price (strike price) in the future.

    What Factors Drive the Nasdaq 100

    Many different factors drive the Nasdaq 100 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 Nasdaq 100 as it affects the cost of credit, on which many corporations are heavily reliant. As such the level of inflation can be a major driver too as well as other metrics which impact on the decisions of the Fed.

    Eyes on Powell testimony and US jobs report

    In its Semi-annual Monetary Policy Report published on Friday, the Federal Reserve (Fed) reiterated that it’s not appropriate to reduce the policy rate until they have greater confidence inflation will move sustainably toward 2%.

    Fed Chairman Jerome Powell will present the monetary policy report and respond to questions in a two-day testimony before the Congress, starting Wednesday.

    On Friday, the US Bureau of Labor Statistics will release February jobs report, which will include Nonfarm Payrolls, the Unemployment Rate and wage inflation figures.

    Week’s focus on Powell testimony, US jobs, ECB decision [Video]

    Fed FAQs

    What does the Federal Reserve do, how does it impact the US Dollar?

    Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
    When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
    When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

    How often does the Fed hold monetary policy meetings?

    The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
    The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

    What is Quantitative Easing (QE) and how does it impact USD?

    In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
    It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

    What is Quantitative Tightening (QT) and how does it impact the US Dollar?

    Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

    Disclaimer: For information purposes only. Past performance is not indicative of future results.
    German ZEW Economic Sentiment Index climbs to 42.9 in April vs. 35.1 expectedThe headline German ZEW Economic Sentiment Index jumped from 31.7 in March to 42.9 in April, beating the market expectations of 35.1.
    Source  Fxstreet
    The headline German ZEW Economic Sentiment Index jumped from 31.7 in March to 42.9 in April, beating the market expectations of 35.1.
    US UoM Consumer Confidence Index declines to 77.9 in April vs. 79 expectedConsumer confidence in the US weakened in early April, with the University of Michigan's Consumer Sentiment Index edging lower to 77.9 from 79.4 in March.
    Source  Fxstreet
    Consumer confidence in the US weakened in early April, with the University of Michigan's Consumer Sentiment Index edging lower to 77.9 from 79.4 in March.
    China’s Trade Balance: Exports decline sharply in MarchChina's Trade Balance for March, in Chinese Yuan terms, came in at CNY415.86 billion, widening from the previous figure of CNY281.97 billion.
    Source  Fxstreet
    China's Trade Balance for March, in Chinese Yuan terms, came in at CNY415.86 billion, widening from the previous figure of CNY281.97 billion.