S&P 500 E-Mini Jun '20 (ESM20)
|Contract||E-Mini S&P 500 Index|
|Tick Size||0.25 points ($12.50 per contract)|
|Daily Limit||7.0%, 13.0% and 20.0% decline below the Settlement Price of the preceding session (limited to 5.0% outside of RTH)|
|Contract Size||$50 times Index|
|Trading Months||Mar, Jun, Sep, Dec (H, M, U, Z)|
|Trading Hours||5:00p.m. - 4:00p.m. (Sun-Fri) (Settles 3:15p.m.) CST|
|Value of One Futures Unit||$50|
|Value of One Options Unit||$50|
|Last Trading Day||Third Friday of the contract month|
A stock index simply represents a basket of underlying stocks. Indexes can be either price-weighted or capitalization-weighted. In a price-weighted index, such as the Dow Jones Industrial Average, the individual stock prices are simply added up and then divided by a divisor, meaning that stocks with higher prices have a higher weighting in the index value. In a capitalization-weighted index, such as the Standard and Poor's 500 index, the weighting of each stock corresponds to the size of the company as determined by its capitalization (i.e., the total dollar value of its stock). Stock indexes cover a variety of different sectors. For example, the Dow Jones Industrial Average contains 30 blue-chip stocks that represent the industrial sector. The S&P 500 index includes 500 of the largest blue-chip U.S. companies. The NYSE index includes all the stocks that are traded at the New York Stock Exchange. The Nasdaq 100 includes the largest 100 companies that are traded on the Nasdaq Exchange. The most popular U.S. stock index futures contract is the E-mini S&P 500 futures contract, which is traded at the CME Group.
Prices - The S&P 500 index (Barchart.com symbol $SPX) struggled in 2018, finally closing the year down -6.2%. The S&P 500 index in early 2018 extended the rally that began in 2016 to post a new record high but then fell sharply in early 2018 when President Trump imposed tariffs on imported solar panels and washing machines and then later on steel and aluminum as well. Mr. Trump also imposed tariffs on $250 billion of imported Chinese products, leading China to impose retaliatory tariffs on $110 billion of U.S. goods exported to China. However, the stock market weakness from tariffs was short-lived and the S&P 500 index resumed its rise to reach a new record high in September 2018.
The stock market then fell sharply late in 2018 and closed the year lower because of (1) slowing global economic growth, (2) the cumulative effect of the Fed's four interest rate hikes during 2018, (3) the plunge in oil prices in late 2018 that hurt energy stocks, and (4) concern about the ongoing U.S.-Chinese trade war. However, the stock market hit its low in late December and then started to rebound higher as the market anticipated that the Fed would have to halt its rate-hike regime and after President Trump and Chinese President Xi on December 1, 2018 agreed to formal trade talks with a 90-day moratorium on any new tariff hikes.
Stocks were supported during 2018 by very strong earnings growth for the S&P 500 companies of about +24% yr/yr. Earnings growth was boosted mainly by the big tax cut implemented on January 1, 2018. Congress slashed the top U.S. corporate tax rate to 21% from 35%. In addition, Congress forced the repatriation of some of the $2.6 trillion of U.S. corporate cash parked overseas, which was used in part to finance larger stock buyback program and higher dividends.
The U.S. stock market during 2018 was able to largely shake off the negative effects of the Federal Reserve's four interest rate hikes that totaled one percentage point during the year. However, by the end of 2018, stock market investors started to get concerned about the Fed's guidance for three more interest rate hikes in 2019 and a continuation of its balance sheet drawdown program indefinitely, thus leading to the sharp sell-off seen in stocks in late 2018. The stock market was able to recover sharply in early 2019, however, after the Fed shifted to a neutral policy and retracted its guidance for higher interest rates in 2019.
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