S&P 500 E-Mini Mar '19 (ESH19)
|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) rallied sharply during 2017 to a new record high and closed the year up +19.4%, adding to the +9.5% gain seen in 2016. U.S. stocks rallied sharply in 2017 due to (1) expectations for a tax cut, (2) strong earnings growth, and (3) the strong U.S. and global economies. The stock market during 2017 was able to shake off the Federal Reserve's three +25 basis point rate hikes.
The U.S. stock market rallied sharply following the November 2016 election and into 2017 after Republicans swept the White House and Congress. Stocks rallied on Republican promises for tax cuts, sharp deregulation, and a $1 trillion infrastructure spending program over ten years. The infrastructure program never materialized and the Republican Congress during the first half of 2017 spent their time unsuccessfully trying to repeal Obamacare. However, the Republican Congress by December was successful in passing a massive tax cut bill that was heavily weighted toward corporate tax cuts. Congress slashed the top U.S. corporate tax rate to 21% from 35%. The tax cut boosted the after-tax earnings of S&P 500 companies by about 6%, which in turn gave a direct boost to stock prices. In addition, Congress forced the repatriation of some $2.6 trillion of U.S. corporate cash held overseas, which was expected to partially go towards stock buybacks and higher dividends.
U.S. stocks in 2017 were also boosted by a sharp improvement in corporate earnings caused by improved U.S. and global economic growth. Earnings growth for the S&P 500 companies was very strong at about 13% in 2017, improving from negligible earnings growth in 2015 and 2016. Moreover, the consensus is for strong earnings growth to continue in 2018 with growth of about 20% due in part to the corporate tax cut that took effect on January 1, 2018.
After a very strong year in 2017, the U.S. stock market in early 2018 went into a steep downside correction after the Trump administration announced tariffs on U.S. steel and aluminum imports. In addition, the Trump administration announced a package of tariffs on some $50 billion worth of U.S. imports from China as retaliation for claimed Chinese intellectual property violations against U.S. companies. There were substantial concerns about a possible trade war between the U.S. and China.
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