- The S&P 500 continues to consolidate near multi-month highs during the European session on Friday.
- Improved sentiment supports an extension of the S&P 500’s rally, but remains capped below 4,300 for now.
- The S&P 500 is trading in a tight range awaiting the next catalyst. Market participants are already focusing on the US CPI and next week’s Fed rate decision.
The index S&P 500 remains limited in a tight range during the European session on Friday, near multi-month highs. At time of writing, the index is trading at 4,291 points, virtually unchanged on the day after rising 0.62% the day before.
The S&P 500 continues to consolidate after the strong rise of the previous week and is trading within a tight 40-point range this week, with a high reached on Monday at 4,297 (the highest level since August 2022), pending the next fundamental catalyst.
S&P 500: Focus returns to US data
With the law passing to suspend the US debt ceiling limit, investors’ attention is once again focused on US data, which has recently shown improvements in the labor market and with inflation easing. both in the manufacturing and service sectors.
This recent data could lead the Fed to keep rates unchanged in June and would support a rise in the S&P 500. At the time of writing, the probability that rates will remain unchanged at the next Federal Open Market Committee (FOMC) meeting on June 13-14 sits just above 78%:
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No economic data from the US will be released today as market participants already await the release of the US Consumer Price Index (CPI) for May and the Federal Reserve’s interest rate decision in the next week.
S&P 500 Technical Analysis
Technically, the S&P 500 It is consolidating at the highest levels since August 2022 after last week’s improvement in sentiment.
At the time of writing, the S&P 500 is trading at 4,291very close to the annual maximum of 4,297 reached on Monday. If the rally continues and the mentioned level is broken, the index could point to the region of the 4,310-4,320 points, zone of highs of August 2022. Above this region, the S&P 500 could target the zone of 4,380at levels not seen since April of last year
On the other hand, initial support could be seen in the 4,280 points (daily minimum), followed by 4,258 (weekly minimum) and from the region of the 4,230 points and of the round level of 4,200.
S&P 500 daily chart
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S&P 500 FAQ
What is the S&P 500?
The S&P 500 is a widely followed stock index that measures the performance of 500 public companies and is considered a broad measure of the US stock market. The influence of each company in the index calculation is weighted based on market capitalization. This is calculated by multiplying the number of listed shares of the company by the share price. The S&P 500 Index has achieved impressive returns: $1.00 invested in 1970 would have produced 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 other indices where they are included based on established standards. Still, they must meet certain eligibility criteria, the most important of which is market capitalization, which must be equal to or greater than $12.7 billion. Other criteria are liquidity, domicile, market capitalization, industry, financial viability, time listed, and representation of sectors of the US economy. The nine largest companies in the index represent 27.8% of the index’s market capitalization.
How can I trade the S&P 500?
There are several ways to trade the S&P 500. Most retail brokers and spread betting platforms allow traders to use Contracts for Difference (CFDs) to place bets on the direction of the price. In addition, you can buy index funds, mutual funds, and exchange-traded funds (ETFs) that track the price of the S&P 500. The most liquid of the ETFs is the London Stock Exchange ETF. The most liquid of the ETFs is the State Street Corporation SPY. The Chicago Mercantile Exchange (CME) offers futures contracts on the index and the Chicago Board of Options (CMOE) offers options, as well as ETFs, Reverse ETFs, and Leveraged ETFs.
What factors drive the S&P 500?
Many factors drive the S&P 500, but it’s primarily the aggregate performance of its component companies, revealed in their quarterly and annual earnings reports. US and global macroeconomic data also contributes as it influences investor confidence, which if positive boosts earnings. 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 companies are highly dependent. Therefore, inflation can be a determining factor, as well as other parameters that influence the decisions of the Federal Reserve.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
