Dow Futures Mini Dec '19 (YMZ19)
|Contract||E-Mini Dow Jones Industrial Average|
|Tick Size||1 point ($5.00 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||$5 times Index|
|Trading Months||Mar, Jun, Sep, Dec (H, M, U, Z)|
|Trading Hours||5:00p.m. - 4:00p.m. (Sun-Fri) CST (Settles 3:15p.m.) CST|
|Value of One Futures Unit||$5|
|Value of One Options Unit||$5|
|Last Trading Day||Thursday before the third Friday|
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) during 2019 rallied sharply by +29%. U.S. stocks came into 2019 on a weak note after having seen a sharp downward correction during Q4-2018 on the cumulative effects of the Federal Reserve's interest rate hikes from 2015 through 2018. However, the stock market started to rally in early 2019 as the Fed backed off its interest-rate-hike regime and instead implemented three -25 bp interest rate cuts during 2019. The Fed was forced into those rate cuts by the slowdown in the U.S. economy that was seen during 2019 due to trade tensions, weak overseas growth, and a recession in the U.S. manufacturing sector.
The stock market during 2019 was largely able to shake off the negative effects from the U.S. trade war. By September 2019, the U.S. had penalty tariffs on about $360 billion of Chinese goods, and China had penalty tariffs on about $110 billion of U.S. goods. There was relief in the stock market in December 2019 when the U.S. and China agreed to a "phase one" trade deal in which both sides agreed to reduce some penalty tariffs and China agreed to purchase an additional $200 billion of U.S. goods during 2020-21.
Earnings growth by the S&P 500 companies rose by +2% yr/yr in 2019, adding to the stellar growth of +23% seen in 2018. Earnings growth in 2018 soared because Congress slashed the top U.S. corporate tax rate to 21% from 35% effective on January 1, 2018.
The S&P 500 index during 2019 rallied sharply and progressively set new record highs. That rally continued into early 2020 as the stock market saw support from the U.S.-China trade deal that was reached in December 2019 and signed in January 2020. However, the S&P 500 index then plunged beginning in late February when it became clear that the coronavirus outbreak that started in China was headed for the rest of the world. The S&P 500 index in mid-March plunged to a 3-1/4 year low where it was down by a total of -35% from the mid-February record high.
Stocks were particularly hard-hit in sectors such as airlines, cruise lines, travel companies, hotels, restaurants, and retail stores. The U.S. economy in early 2020 faced a hard-stop like it had never seen before, even during times of war when it was at least necessary to produce materiel for the war effort. Stock investors were hoping for a quick recovery in the economy once the pandemic passes, but it remained unclear how long that might take with the nation largely being taken by surprise in responding to the worst pandemic in about 100 years.
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