The S&P 500 or Standard and Poors 500 Index as referred to on a daily basis in market news or forex trading indicator news refers to a free float capitalization weighted US indicative index which has been published since 1957 and represents the prices of 500 large cap common stocks which trade on the two largest American stock markets; the New York Stock Exchange and the Nasdaq.
The S & P 500 focuses on US based firms although in very few cases it maintains companies within its index that are not headquartered within the US but do have a direct contribution towards the US economy. Companies of this category may have diverted main offices outside the US due to production costs; but do continue to trade directly on the NYSE or the Nasdaq and therefore do have a direct role in the US trading session.
The Standard and Poor 500 is a daily inclusion in most market news referring to the US trading session as it is considered the second most popular and indicative index of the US market after the Dow Jones Index. The index includes both growing stocks and less volatile stocks which on their average present a indicative outlook of the US stock market. Stocks that are included in the S&P 500 are additionally part of the more broad S&P 1500 and S&P Global 1200 stock market indices.
The companies which belong to the S&P 500 are selected by committee and they are selected to be a part of the index due to their ability to shape an average outlook of the US economy in a whole. In difference to other compilations like the Forbes 500 the S&P 500 does not include companies solely based on their level of gross revenue but takes into consideration liquidity and volume of trade around stocks of the companies themselves.
The S&P 500 is updated during trading sessions every 15 seconds; important adjustments that might include stock splits, restructuring events or replacements of companies due to migration outside the US are timely adjusted after the close of trading. These type of adjustments are known as divisor adjustments and they are mandatory in order to keep the S&P 500 accurate and moreover trustworthy.
In online trading and under the chapter broadly known as online trading or more broadly forex trading the S&P 500 is only reasonable to be both mentioned and used in many cases through out a trading day with more weight and more presence during the US trading session as it is a strong determinant of the market outlook and therefore has a contributing role in the daily outlook and foreign exchange prices of the USD against a basket of currencies.
In addition to its contributing role as a market determinant, within the trading terminals offered at the vast majorities of forex brokers under the category of products called CFD’s on Future Contracts you will come across the E-mini S&P 500 or E-mini which belongs to the S&P 500 Futures and is presented under the ticker symbol #ES.
The E-Mini or E-Mini S&P 500 is a futures contract which is electronically traded on the Chicago Mercantile Exchange similarly to Dow Jones Futures (Mini-sized Dow) as they are referred to within online trading platforms and represent a specimen of normal futures contracts.
E-mini S&P 500 future contracts are one fifth the size of the standard S&P 500 futures contract and posses main advantages towards their trading audience as they include liquidity, greater affordability for individual investors and around-the-clock trading through online trading terminals offered at forex brokers.
The introduction of the mini S&P 500 was made by the Chicago Mercantile Exchange in 1997 at a stage when the value of the existing S&P contract was growing too big for small investors to trade due to capacity lack.
The introduction of the mini S&P resulted to rapid growth as it quickly managed to become the world’s most popular equity index futures.
Currently the average daily volume of the E-mini S&P 500 is over $140 billion exceeding the dollar volume of the underlying 500 stocks of the S&P 500. The E-Mini contract posseses major advantages to traders as it trades 23.25 hours a day, five days a week during forex trading hours; and belongs to the March quarterly expiration cycle.
The actual institution to which the title of the above mentioned indexes belong to are Standard and Poors a a US headquartered financial services company which is a division of the Mc Graw Hill companies often referred to as S&P.
Standard and Poor provide in depth research and analysis of both stocks and bonds as they are well known for their stock market indexes which are daily referred to in the vast majority of market news, trading news and forex market indicators.
Amongst them are the S&P 500 which primarily represents US headquartered companies, the ASX 200 which represents Australian based companies trading on the Sydney stock exchange, the Italian MIB and the S&P CNX Nifty which is an indicative index for India.
On another note Standard and Poor are additionally one of the three largest credit rating agencies together with Moodys and Fitch ratings. Their publically released credit ratings include both public and private corporations which in many cases affect interest rates on a macro level as derived ratings reflect creditability and financial health which therefore reflect overall risk assesment.
S&P 500 ratings range in short term and long term ratings; long term borrower’s ratings range from AAA to D with intermediate ratings through out the total. The lower the rating the higher the interest rate at which the borrower is likely to acquire a loan as the moving down from AAA to D the scale in reality represents higher risk and therefore affects the borrower with either higher interest rates or with more securities needed in order to lend. Short term rates more or less represent the commitment of issuer to meet specific obligations within agreements are strong or low. The scale is at its highest (best rating) at A-1 and at its worst at D.