The S&P 500 (SPX) index is trading near Friday’s closing level at 5,027.46, the Dow Jones (DJIA) is little changed at 38,653.5, and the Nasdaq (IXIC) gains 0.11% to trade at 16,008.1 at the time of writing.
What to know as stock markets open
- The Energy Sector is the best-performing major sector in the S&P 500 after the opening bell, rising 0.8% on the day. On the other hand, the Health Care Sector is down 0.4%.
- Diamondback Energy Inx. (FANG) is up more than 7% as the top gainer in the early trade. The biggest decliner is Hershey Co. (HSY), down nearly 2.5%.
- Nasdaq Composite rose more than 2% last week and the S&P 500 posted gains for the fourth consecutive week to post a record-high closing above 5,000. Dow Jones underperformed and was virtually unchanged for the week.
- The US Bureau of Labor Statistics (BLS) announced on Friday that it revised the monthly Consumer Price Index (CPI) increase for December lower to 0.2% from 0.3%.
- Dallas Federal Reserve (Fed) Bank President Lorie Logan said that there is no urgency to cut interest rates. Logan acknowledged that there has been “tremendous progress” on bringing down inflation but noted that she would want to see further evidence on inflation to confirm the progress is durable.
- The US Department of Labor reported that there were 218,000 Initial Jobless Claims in the week ending February 3, down from the previous week’s revised 227,000.
- On Tuesday, the BLS will release January CPI data. The headline annual CPI is forecast to rise 3% on a yearly basis, at a softer pace than December’s 3.4%. The Core CPI, which excludes volatile food and energy prices, is expected to increase 3.8%.
- Arista Networks Inc. (ANET), Cadence Design Systems Inc. (DNS) and Waste Management Inc. (WM) are among top companies that will release earnings reports after the closing bell on Monday.
- Later in the week, January Retail Sales, Industrial Production and Producer Price Index (PPI) data will be featured in the US economic calendar.
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.
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.
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.
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.
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