S&P 500 Index
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- Metadoro first
It feels like a new wave of Wall Street rally is now postponed. The AI-related focal point, NVIDIA, suddenly turned into a leading contributor to the lower quotes of the US stock indices. That happened after the chipmaker got a "burn notice" in the form of a subpoena sent by the U.S. Department of Justice. The federal body launched a deepening probe on claims that NVIDIA allegedly is making it harder for AI chip buyers to change suppliers and even penalizes those who do not exclusively use its AI-optimized processors, if we are to believe several whistleblowers including Bloomberg sources.
NVIDIA stock immediately lost more than 10% of its market caps to plunge from a previously sustainable footing above $120 to the current underwater below $105. The crowd is spooked even though NVIDIA representatives are calm when commenting that buyers can easily "choose whatever solution is best for them," while also adding that all of NVIDIA's recent blockbuster chips' sales convincingly showed that the firm's business "wins by merit". The range of estimates for NVIDIA's future dynamics widened, yet other chip and cloud depending stocks also fell, with AMD touching the levels below $140 after today's opening bell (but facing a more than 3.5% recovery at the moment already) and Broadcom (AVGO) practicing in diving to depths below $150 for the first time since the end of the overall market correction in early August. In my humble opinion, all of them will jump out of their corresponding lows. Needless to say, NVIDIA will surely go dry out of this absurd investigation case, so that dips in the vicinity of $100 per share, or any double-digits equity valuations for the AI monster, would be a strong buy with a very fast return of the invested capital.
Meanwhile, the US500 broad indicator slipped to 5,500 on this background but later tried its best to keep a straight face by rebounding to 5,550 within the first two hours of the regular session in New York on Wednesday. The lower than anticipated JOLTS (Job Openings and Labor Turnover Survey) freshly marked an ongoing cooling of the U.S. labour conditions, as the number of vacancies fell from 8.184 million in June (now revised downward to 7.910 million) to 7.673 million in July, while average expert forecasts pointed to a potential of 8.090 million. When combined with the much-worried nonfarm payrolls report which is scheduled on Friday, September 6, this may be a precursor of delivering a bigger half-a-percentage-point rate cut by the Federal Reserve in two weeks, which itself is clearly positive for the bullish trend, while the facts of job market slowdown is surely negative.
However, uncertain factors continue to create nervousness on global markets, which may postpone the bullish moment of truth, which I bet will ultimately lead the S&P 500 to new historical highs above 5,850. Yet, the route may be indirect to pass through 5,300-5,400 ravines once again before a new wave of the rally would prevail, because minor reasons are stealing the crowd's attention repeatedly.
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 |
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Minimum transaction volume | 0.01 lot |
Maximum transaction volume | 100 lots |
Hedging margin | 50% |
USD Exposure | Max Leverage Applied | Floating Margin |
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