Stocks dropped, with Friday’s $4 trillion triple witching options event potentially amplifying volatility and traders weighing a raft of economic data ahead of next week’s Federal Reserve decision.
(Bloomberg) — Stocks dropped, with Friday’s $4 trillion triple witching options event potentially amplifying volatility and traders weighing a raft of economic data ahead of next week’s Federal Reserve decision.
The S&P 500 almost erased this week’s gain, while the Nasdaq 100 fell over 1% amid a slide in giants like Amazon.com Inc. and Nvidia Corp. A gauge of chipmakers slumped on a news report that Taiwan Semiconductor Manufacturing Co. has asked major suppliers to delay shipment of high-end equipment. Ford Motor Co. and General Motors Co. erased losses on speculation the impact of a targeted auto strike will be limited. Apple Inc. outperformed. Its new iPhone 15 Pro quickly saw initial delivery times slip into October as the new flagship device went on sale for pre-orders on Friday, suggesting strong demand.
Read: Dow Industrials Paying Price for Leaving Out Amazon and Alphabet
Piles of derivatives contracts tied to stocks, index options and futures are scheduled to mature Friday — compelling traders to roll over their existing positions or to start new ones. This time, it coincides with the rebalancing of benchmark indexes including the S&P 500, another catalyst for more share transactions.
“Options expiration forces people to adjust their positions, and this is an especially powerful expiration that can add fuel to market moves,” said Callie Cox at eToro. “This is especially prevalent in individual stocks, where trading in the shares and options can be thin. Brace for swings, but try not to tap out of this market until we see convincing evidence of a recession.”
US inflation expectations fell to the lowest in more than two years as consumers grew more optimistic about the economic outlook. Even so, sentiment fell to 67.7 — below the median estimate in a Bloomberg survey of economists. A measure of New York state factory activity unexpectedly expanded amid new orders. Production at factories barely rose in August, restrained by a drop in output of motor vehicles.
A resilient US economy will prompt the Fed to pencil in one more interest-rate hike this year and stay at the peak level next year for longer than previously expected, according to economists surveyed by Bloomberg News.
“In the near term, the economy’s resiliency has inspired a bit of optimism that perhaps the Fed can stick the landing this time after all,” said Jim Baird at Plante Moran Financial Advisors. “The collective consumer mood remains tentative – not as negative as a year ago when recession fears were high, but still cognizant of the range of risks that continue to bubble.”
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Equity funds saw the biggest weekly inflow in 18 months amid growing investor confidence the US economy is headed for a soft landing, according to Bank of America Corp.
Global stocks attracted $25.3 billion in the week to Sept. 13 — the most since March 2022 — according to EPFR Global data cited by BofA. But amid the renewed optimism on the US economy, strategist Michael Hartnett sees a bearish broader picture, with cash and Treasuries having attracted the bulk of inflows and both asset classes on track for a record year.
Corporate Highlights
- Charles Schwab Corp. said it has been temporarily affected by attrition from clients as it integrates TD Ameritrade, leading to a decline in net new money for the firm last month.
- Adobe Inc. provided a sales outlook that met analysts’ expectations, but disappointed investors who expected demand for the company’s artificial intelligence tools would boost revenue.
- Walt Disney Co. has now fielded at least one offer for its ABC TV network, local stations and some cable channels, and more may come as the company seeks to shed what it considers non-core assets and focus on streaming.
- Discover Financial Services is exploring the potential sale of its student-loan business as the company seeks to clean up operations in the aftermath of a series of regulatory lapses, according to people familiar with the matter.
- Instacart, the largest grocery-delivery business in the US, raised the price range for its upcoming initial public offering following a strong trading debut for chip designer Arm Holdings.
Some of the main moves in markets:
Stocks
- The S&P 500 fell 0.8% as of 12:07 p.m. New York time
- The Nasdaq 100 fell 1.4%
- The Dow Jones Industrial Average fell 0.5%
- The Stoxx Europe 600 rose 0.2%
- The MSCI World index fell 0.4%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.3% to $1.0679
- The British pound fell 0.1% to $1.2395
- The Japanese yen fell 0.3% to 147.84 per dollar
Cryptocurrencies
- Bitcoin fell 0.9% to $26,350.31
- Ether fell 0.5% to $1,621.03
Bonds
- The yield on 10-year Treasuries advanced four basis points to 4.33%
- Germany’s 10-year yield advanced eight basis points to 2.68%
- Britain’s 10-year yield advanced eight basis points to 4.36%
Commodities
- West Texas Intermediate crude rose 0.6% to $90.73 a barrel
- Gold futures rose 0.8% to $1,949.20 an ounce
This story was produced with the assistance of Bloomberg Automation.
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