> How does stock futures influence the stock market?

How does stock futures influence the stock market?

Posted at: 2014-12-05 
When you say "stock futures," do you mean "single-stock futures" or "stock index futures?" Example, link, specific? What is it you don't understand?

Futures trading provides a way to establish a form of price knowledge leading to continuous price discovery. Futures prices reflect not only current cash prices, but also expectations of future prices and general economic factors.

Here are many of the world stock index futures contracts:

http://www.investing.com/indices/indices...

The DJIA is often used as a proxy for the market. The indices ARE the market. Same thing with the index futures: the index IS the market with a forward premium. It's like asking, "How does the market influence the market?" It is unclear what you want to know, or what you don't understand without more details and explanation.

For example, the S&P 500 Index is one of the most widely traded index futures contracts in the U.S. Many traders use the S&P emini contract or the Dow mini contract.

Since futures are leveraged contracts, they generally cause more volatility than unleveraged trading.

Stock indexes are affected by whatever influences the stock market as a whole. Interest rates certainly play a major role - higher interest rates usually hurt the stock market. Other effects include the overall prospects for corporate earnings and corporate tax policies that help or hurt big business.

As for Interest-rate and currency futures - those based on T-bonds, T-bills, Eurodollars and the five major currencies - the biggest influences are the policies and trading activities of the Federal Reserve, U.S. Treasury and foreign central banks, all of which affect interest rates.

Commodity Futures can greatly influence the stock market.

For example ,if a crop ( coffee or oranges to name just two of many ) is correctly anticipated to yield well below average due to forecast weather conditions, then purchasing futures in that commodity will provide a profit when the seasonal price goes up.

Your chips from the chippie would rise substantially if a poor potato crop was correctly anticipated and potato futures bought. Conversely, the price falls deeply if there is a glut crop as happened a dozen years ago when potatoes couldn`t be given away.

Companies that rely on seasonal yields take an interest and position in the futures market to guard against higher prices should supplies fall short. The price of your beer and daily bread are dependent on it.

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It doesn't influence the market any more than the current index level. The future indicate the current direction based on over night trades