- The NASDAQ closed at a three-year high on Thursday.
- January PCE inflation data came in line with market expectations.
- S&P and DJIA both posted a fourth straight month of gains.
The S&P 500 (SPX) index rose 0.52% to close the session at 5,096.27. The Dow Jones (DJIA) climbed 0.12% to end at 38,996.39, while the Nasdaq (IXIC) gained 0.90% to finish at 16,091.92.
Stock market news
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 Thursday gainer, rising more than 14.56% and closing at $35.32. Xcel Energy Inc. (XEL) fell 8.63% 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.
Assessing the latest developments in financial markets, “S&P 500 (-0.17%) still experiencing little movement since Nvidia’s earnings last week. The latest decline means the index is still on track for a weekly loss, and there were larger falls for the NASDAQ (-0.55%) and the Magnificent 7 (-0.58%),” said Jim Reid, global head of economics and thematic research at Deutsche Bank, and continued:
“Meanwhile in Europe, the story was also one of losses yesterday, with the STOXX 600 down -0.35%. That said, the DAX (+0.25%) continued to outperform, posting a 6th consecutive advance and closing at a fresh all-time high.”
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.
Risk mood improves after PCE inflation data
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' estimate.
Breaking: US Core PCE inflation edges lower to 2.8% as expected.
Reflecting the improving risk mood after PCE inflation data, the CBOE Volatility Index (VIX), Wall Street's fear gauge, is down more than 2% on the day.
Assesing the PCE inflation report "the core PCE deflator rose 0.4% last month, marking the fastest pickup in a year, but the annual pace of core inflation still ticked down a tenth to 2.8%. While the large monthly gain suggests rate cuts aren't imminent, the continued move back toward the Fed's 2% target is consistent with rate cuts appearing on the horizon", said Wells Fargo Research Team. "Ultimately we'd suggest you look through the January data. The 1% pop in income won't continue, and the gain in price growth is likely not the start of renewed sustained inflationary pressure. We expect consumer momentum remains intact and that a still-sturdy labor market should offer support to spending this year, even if that pace of spending is set to moderate. The upside of that moderation will be less demand-pull on inflation."
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.
The US Census Bureau reported on Tuesday that Durable Goods Orders declined by 6.1%, or $18 billion, to $276.7 billion in January. This reading followed the 0.3% decrease recorded in December and came in worse than the market expectation for a contraction of 4.5%.
New York Fed President John Williams said late Wednesday that the inflation outlook has improved and that his baseline scenario was for three rate cuts in 2024.
Fed on course to begin lowering rates at the June FOMC meeting – ABN Amro.
According to the CME FedWatch Tool, markets are nearly fully pricing in a no change in the Fed policy rate in March and see an 80% probability of another pause in May.
The Cooper Companies Inc. (COO), Autodesk Inc. (ADSK) and Veeva Systems Inc. (VEEV) will be among top companies that will release quarterly earnings after the closing bell on Thursday.
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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