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- Stock Market Today: Futures trade mixed following bullish action seen on Thursday
Stock Market Today: Futures trade mixed following bullish action seen on Thursday
- Wall Street's main indexes closed in positive territory on Thursday.
- US stock index futures trade mixed ahead of the opening bell on Friday.
- Markets lean toward a Fed rate cut in June after inflation data.
S&P 500 futures fall 0.14%, Dow Jones futures drop 0.15%, and Nasdaq futures are unchanged.
S&P 500 (SPX), Dow Jones (DJIA), and Nasdaq (IXIC) indexes closed on Thursday with a 0.52% gain, a 0.12% increase, and a 0.90% rise, respectively.
What to know before stock market opens
The Technology Sector rose 1.3% on Thursday as the best-performing major S&P sector for the day. The Health Sector was the biggest loser of the equity sectors, falling 0.68%.
Hormel Foods Corp. (HRL) was the biggest gainer on the day, rising more than 14% and closing at $35.32. Xcel Energy Inc. (XEL) fell 8.6% to end at $52.69, beating out Bath & Body Works Inc. (BBWI) as the day's loss-leader, with BBWI shares falling 5.44% and hitting $45.70 at the closing bell.
Inflation in the US, as measured by the change in Personal Consumption Expenditures (PCE) Price Index, declined to 2.4% on a yearly basis in January, the US Bureau of Economic Analysis (BEA) reported on Thursday. This reading followed the 2.6% increase recorded in December and came in line with the market expectation. On a monthly basis, the PCE Price Index rose 0.3% as forecast. The Core PCE Price Index, which excludes volatile food and energy prices, rose 2.8% on a yearly basis, matching analysts' estimates.
The CME FedWatch Tool shows that markets are pricing in a nearly 70% probability that the Federal Reserve (Fed) will lower the policy rate by 25 basis points in June.
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.
Assessing the latest developments in financial markets, “with positive month-end sentiment dominating the end of yesterday’s session, it was not only the S&P 500 eking out yet another all-time high, but there was also a new record high for the NASDAQ (+0.90%), which moved above its previous peak from November 2021,” said Jim Reid, global head of economics and thematic research at Deutsche Bank, and continued:
“Consistent with the narrative of the year so far, the Magnificent 7 outperformed (+1.22%), with Amazon (+2.08%) and Nvidia (+1.87%) leading the way. The equity picture had been more subdued in Europe, where the STOXX 600 ended the day unchanged, although the German DAX (+0.44%) continued to outperform yesterday. Indeed, yesterday’s advance was the 7th consecutive gain for the DAX, taking the index up to a fresh all-time high.”
Atlanta Fed President Raphael Bostic said on Thursday that it might be appropriate to start reducing rates in summer. San Francisco Fed President Mary Daly argued that cutting rates too quickly could cause inflation to get stuck and Cleveland Fed President Loretta Mester noted that they can't expect last year's disinflation to continue.
Earlier in the week, the BEA downwardly revised the annualized Gross Domestic Product (GDP) growth of the US in the fourth quarter to 3.2% from 3.3% in the initial estimate.
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.
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