S&P 500 Index
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The big short play amid the tariff war agenda is going on, even gaining momentum. We surely are not witnessing the crash of global equity markets' stout building, yet the highest short-term profit still comes from downright bearish bets on each and every Wall Street and European stock indicator. U.S. futures sank further, with the S&P 500 broad barometer losing another 3% in the pre-market trading this Monday after nearly touching its lower 4,800 support base during Asia trading hours. Moreover, in just the last three working days, about 15% of its value is wasted. Hong Kong shares faced steepest one-session decline since 1997, including a plunge of the benchmark Hang Seng index by 13.2%. The Hang Seng index is down 27% in a month, being very close to where it just began the year of 2025 before the bulls revived on DeepSeek cheaper AI startup news. China’s mainland CSI300 index of national blue is 7% lower, while the team of state-backed investors admitted it has built up holdings of stocks in order to defend stability in local markets. A group of leading Chinese automakers, including Li Auto, Nio and Xpeng, fell by 12.5% on average, feeling the effects of the de facto blockade of their supplies to U.S. consumers.
Is any company of a business segment still staying unperturbed by this terrible sell-off action in a deep sea of red? A completely quiet place is difficult to find at the moment. Yet, there are equities, which suffered little or even struggled to add in market price on the very start of the massacre, when tech flagships were already leading big losses. As a few examples, McDonald's, Coca-Cola as well as Kroger retailer that operates supermarkets and multi-department stores throughout the U.S. even rose by 2% or more on the closing price of April 3, which was exactly the first working day after Trump's tough tariff announcement, and only later moderately lost some ground. As a result, McDonald's shares are now roughly at the levels they were last seen in mid-March or early February, when the fast-food chain had mostly recovered from the shock of E. coli in one of its menu items. A similar technical pattern is for Coca-Cola, which is still down 4% ahead of the opening bell for the regular trading today after losing 4.44% last Friday, but the soft drinks manufacturer is still traded within the range of February and March, and not near critical lows of a year ago like Amazon or Meta, which just lost double-digits twice over the last several weeks.
This behaviour in the economy segment consumption assets is more typical not when recession is actually waiting around the corner, but rather for situations of psychological uncertainty for most consumers of goods and services, so that households are trying to find a solution in purchasing cheaper food and everyday necessities at low prices, putting aside the rest of the money for a rainy day fund. To some extent, this reassures investing minds about the future prospects of the entire market, saying that the next stage of the overall rally is not completely cancelled, but postponed and can be expected a little later after buying will resume from lower levels. Major tech names are still among the worst losers on today's pre-market, as market crowds fear that their yesterday's darlings may be severely taxed out of revenge by the EU structures. Even the global AI chip leader Nvidia plunged another 6.5% to drop below $88 per share even before the start of the regular session on Wall Street.
The hyping Tesla EV-maker, which traded flat or slightly up in the first 24 hours after the tariffs were imposed, being the least dependent on imported foreign components and having a strong manufacturing base in the US, China and Germany at the same time, and therefore less exposed to cross-border levies, has fallen by 18% over the past two days, including 9% in today's pre-market. This happened mostly due to the overestimation of image risks for Tesla by some of its well-known bullish admirers. Wedbush analyst Dan Ives, one of Tesla’s most prominent long-time bulls, commented on cutting aggressively his price target on the stock from $550 to $315, as he referred to "intensifying tariff pressures and a worsening global brand crisis" and described the current situation as a “double whammy” of economic "tariff Armageddon" and reputational damage that could "reshape Tesla’s trajectory". Wedbush analysts' estimate is that Tesla allegedly lost at least 10% of its future global customer base due to "self-inflicted brand issues", with the damage exceeding 20% among the EU customers' base. For us, this looks like a very aggravated number. Again, $315 is far from $550, but still about 50% higher than the current sub-$220 levels that Tesla is testing now, promising even more gains for buyers from deeper lows. Nevertheless, those comments clearly helped to contribute much to the negative momentum here and now.
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 |
|---|
