S&P 500 futures hit seven-month lows as US-Iran uncertainty deepens
S&P 500 futures fall around 0.6% to 6,370, seven-month lows, during Asian trading hours, ahead of the US regular session open on Monday. US equity futures remain under pressure as risk aversion rises, with uncertainty over a resolution to the Iran conflict deepening.
  • S&P 500 futures slip as risk aversion rises amid deepening uncertainty over the Iran conflict.
  • President Trump said the US could take Iran’s oil, including seizing Kharg Island.
  • Traders await Nonfarm Payrolls and ISM PMI to shape Fed policy expectations.

S&P 500 futures fall around 0.6% to 6,370, seven-month lows, during Asian trading hours, ahead of the US regular session open on Monday. US equity futures remain under pressure as risk aversion rises, with uncertainty over a resolution to the Iran conflict deepening.

According to Reuters, US President Donald Trump told the Financial Times that the US could “take the oil in Iran,” including seizing the export hub of Kharg Island, which he claimed is undefended. However, Trump added that discussions with Tehran are “doing extremely well,” with indirect talks via emissaries progressing and a deal potentially achievable “fairly quickly.”

A Wall Street Journal (WSJ) report last week indicated the US Pentagon is considering deploying 10,000 additional troops to Iran. In response, Ebrahim Zolfaqari warned on Iranian state TV that “US troops will be good food for sharks of the Persian Gulf.”

Traders now turn to key US economic data this week, including labor market indicators, particularly Nonfarm Payrolls (NFP) and the ISM Purchasing Managers’ Index (PMI), which are expected to shape expectations for the Federal Reserve (Fed) policy outlook. On the earnings front, Nike, McCormick & Company, and Conagra Brands are scheduled to report results in the week ahead.

S&P 500 FAQs

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%.

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.

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.

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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