S&P 500 Index
- By date
- Metadoro first
Global equities scored additional support this week with interest rate policy hints from the Reserve Bank of Australia (RBA). Although the RBA decided to keep its key official borrowing cost level unchanged at 3.60%, also containing some hawkish notes in afterward comments, markets are betting on slashing Australian interest rates later in November. The RBA said recent inflation gauges pointed moderately higher than it was previously expected, so that the economy does not require emergency support, but a lasting recovery in national business activity may need regulatory help in the future. Australian central bankers are more inclined to pause, then wait and see after assessing the further dynamic, in clear contrast with U.S. Federal Reserve's signalling that its monetary policy needs to be eased before the end of the year, following the already made 0.25% rate cut move on September 17. This built a temporary divergence between Australian and U.S. monetary paths to work in favour of holding neutral AUDUSD positions exactly at the moment when the Greenback becomes weaker against Gold futures, Japanese Yen, Chinese Yuan and some European rivals. However, lower Dollar quotes are as good for stock prices on Wall Street as an inevitability of lower interest rates at various countries and continents, because lower rates make credit money more accessible for investing those money in enhancing stock portfolios, while lower Dollar as the unit of measurement for U.S. stock assets also promise to make stocks more expensive. Indeed, all driving stocks of the global digital industry, be it Google or Nvidia as the first examples just now coming on mind, will be worth excessively 10% if the USD as their price's unit loses the same 10% due to repeating sell-offs of the US Dollar as a funding currency for shares like Google, Nvidia and many others. We see obvious proof of this in a so fast pick-up of the broad S&P 500 index price from intraday lows around 6,630 this Wednesday, October 1, following persistently upside trend in precious metals and still weakening Dollar. Nvidia has already shown its freshest all-time high of around $187.30 on this development only one day before.
Meanwhile, the crowd's attention is turning to the possible publication of September’s nonfarm payrolls, scheduled on October 3. Cooling jobs picture has formed exactly a major focus for the Federal Reserve's projections two weeks ago. Therefore, further job weakness may be a long-playing positive factor for converting even more money into U.S. equities. Today's report by the U.S. Automatic Data Processing (ADP) service played on the same bullish side for Wall Street after showing the biggest private nonfarm payroll drop in 2.5 years. American businesses altogether shed a seasonally adjusted 32,000 jobs instead of adding 45,000 jobs in average expert forecasts.
Even though ADP data doesn't really correlate with official Nonfarm payrolls from the Bureau of Labour Statistics (BLS), its directional messages of poorer steam of U.S. economy is so clear, and poorer jobs means more investors-friendly Fed policy moves to normalise jobs, and both factors may only contribute into ever-growing Wall St sentiment.
S&P 500 Index
As it is the most commonly used stock index it has some unique features a trader should keep in mind:
- The index represents the broad stock market performance since it lists companies from various sectors. It is not focused on specific industries or segments like the Dow Jones index family and the Nasdaq index. So, it is often called a “barometer of American economy;
- There are different sectors inside the index, which represent companies from familiar and particular sectors. According to numbers released on May 31, 2023 the smallest sector by market cap is Materials with a share of 2.4% (all numbers are given as of May 31, 2023), while the largest is Information technology with 28% of the index market cap. The index also lists companies from healthcare, financials, consumer discretionary, communication services, industrials, consumer staples, energy, utilities, and real estate. A sector breakdown allows investors to distinguish the best performing sectors and select the best performing stocks inside the sector. It also allows for the evaluation of economic performance of the United States in General and for a look at what is driving the American economy;
- The index is very sensitive to macroeconomic data, and positively reacts to rising GDP, retail sales, investments, and the phase in which houses are being built. Any negative news in these areas may push the index down. Macroeconomic data may have a sustainable effect on the index as declining GDP will put sustainable pressure on it, and vice versa;
- The index is very sensitive to the monetary policy decisions of the Federal Reserve (Fed). Rising interest rates and increasing borrowing costs result in less money in the economy and this leads to lower corporate margins, lower consumer and investment demand, and eventually to lower investments in stocks. So, the Fed’s hawkish stance usually results in a weaker S&P 500 index. A dovish monetary policy by the Fed usually supports the index. Thus, the Fed’s interest rate actions, testimonies of its head and FOMC voting members should be monitored;
- The Consumer Price Index (PCI) and the Personal Consumption Expenditures Price Index (PCE) data, which represent inflation, affect the index. If the numbers are far from the Fed’s target, which is set at 2%, it may signal to the possibility that the Fed may continue with its hawkish stance, meaning pressure on the S&P 500 index. Any increase of inflation means the pressure will rise. If inflation slows down to below the 2% target, it is likely to push the index up;
- The S&P 500 index is a risky asset as it represents the sentiment in the market, and the appetite for risk. A rising appetite for risk supports the index, while uncertainty, which lowers economy and geopolitical risks, put pressure on it;
- The index has a negative correlation with the USD/JPY as the Japanese Yen is regularly used for carry trading. So, a deteriorating Yen may signal to a decline of the index;
- The S&P 500 is a very popular asset for investments. An individual may invest in S&P futures, CFD’s of ETF’s that are linked to the index. This is a very diversified asset, and is suitable for conservative investors as it has lower volatility than any of its components, or even currencies or commodities. Thus, the index may serve as a hedge asset inside an investment portfolio;
- The index is linked to the U.S. stock market’s opening hours, but futures and CFD trading on the index continues mostly throughout 24/5, excluding weekends. So, the index may open with a gap if something very important has happened during a weekend.
| Ticker | US500 |
| Contract value | 10 USD x US500 Index |
| Maximum leverage | 1:100 |
| Date | Short Swap (%) | Long Swap (%) | No data |
|---|
| Minimum transaction volume | 0.01 lot |
| Maximum transaction volume | 100 lots |
| Hedging margin | 50% |
| USD Exposure | Max Leverage Applied | Floating Margin |
|---|
