Stock Fluctuations in the Last Minutes of the Big Options Day: U.S. stocks lost momentum by the end of Friday’s session as the positive sentiment following
the Federal Reserve’s half-percentage-point interest rate cut faded.
Expiring derivatives contracts and significant rebalancing contributed to increased market volatility.

Content
Fluctuations Between Gains and Losses
Quarterly Triple Witching Event
Stock Fluctuations

The Federal Reserve
Differing Viewpoints
Bonds and Gold
New Data

Key Market Movements

Fluctuations Between Gains and Losses

After fluctuating between gains and losses in the final minutes of trading,
both the S&P 500 and Nasdaq 100 indices ended the session down by 0.2%,
with the broader index setting a new record high for 2024.
Meanwhile, the Dow Jones Industrial Average gained 0.1%,
setting a record closing level.
More than 20 billion shares were traded on U.S. exchanges,
marking the busiest session since January 2021.

Quarterly “Triple Witching” Event

Friday saw the quarterly “Triple Witching” event,
where $5.1 trillion worth of stock, index options, and futures contracts expired,
according to an analysis firm Asym 500 estimate.
An additional $250 billion in index trades were also absorbed.
This event is known for causing sudden price movements as traders renew existing positions or open new ones.

Stock Fluctuation

Despite U.S. stocks extending gains for the second consecutive week,
disappointing earnings reports weighed on the market.
FedEx Corp. shares fell 15% after missing profit expectations and warning of a business slowdown.
Meanwhile, Lennar Corp.’s stock dropped after quarterly home orders fell below Wall Street estimates.
Among the gainers was Intel Corp.
after a report hinted at a possible acquisition by Qualcomm.
At the same time, Constellation Energy Corp.
the largest U.S. operator of nuclear reactors
reached a record high with plans to restart the Three Mile Island reactor.

The Federal Reserve

Confidence is growing that the Federal Reserve will manage a soft economic landing,
though warnings like those from FedEx highlight ongoing concerns.
Federal Reserve policymakers expect an additional half-point cut this year.
Krishna Guha of Evercore ISI wrote,
“It is unlikely that the continuous risk rally will persist amid
the uncertainty that may occur during the election.”
He added, “Investors should consider the gains after
the Federal Reserve’s decision as an initial boost,
with further gains to come after Election Day.”
Guha believes that another half-point cut could be possible
if labor or inflation data comes in weak.
Gold hit an all-time high as traders considered
the possibility of further monetary easing from the Federal Reserve.

Differing Viewpoints

Traders also weighed the differing perspectives of Federal Reserve officials
regarding consumers’ purchasing power.
Christopher Waller told CNBC that positive inflation data convinced
him to support the half-point rate cut.
Meanwhile, Michelle Bowman, the sole dissenting voice on the large rate cut,
expressed concern that the move might declare victory over inflation too early.
At the same time, JPMorgan CEO Jamie Dimon expressed
skepticism about the world’s largest economy avoiding a recession during slowing growth.
Dimon said at an event, “I hope that’s true,
but I’m also more skeptical that inflation will disappear that easily,
not because it hasn’t dropped – it has – but because it may drop further.”

Bonds and Gold

Gold traded above $2,600 an ounce,
extending its gains after an Israeli strike on the outskirts of Beirut.
At the same time, the U.S. dollar index rose,
while Treasury bond performance varied.
Michael Hartnett of Bank of America believes
that the optimism in stock markets following the Federal Reserve’s
the decision could increase bubble risks,
making bonds and gold attractive hedges against a recession or renewed inflation.
He added that stock markets are now pricing in more monetary easing,
with expectations for S&P 500 company profits to increase by 18%
by the end of 2025.
Hartnett wrote in a note, “Risks don’t get much better than this,
so investors are forced to chase the rally.”
He also noted that non-U.S. stocks and commodities were good ways
to deal with a potential soft economic landing,
with the latter acting as a hedge against inflation.
International stocks are cheaper and outperform their U.S. counterparts.

New Data

Investors will receive fresh data next week on the Purchasing Managers’ Index (PMI),
Gross Domestic Product (GDP),
and the Federal Reserve’s preferred inflation gauge (PCE).
Several Federal Reserve officials, including Raphael Bostic and Austan Goolsbee,
are also scheduled to give speeches.

Key Market Movements

Stocks

The S&P 500 fell by 0.2%
The Nasdaq 100 fell by 0.2%
The Dow Jones Industrial Average was mostly unchanged

Currencies

The Euro was flat at $1.1161
The British pound rose 0.2% to $1.3316
The Japanese yen fell 0.9% to 143.91 yen per dollar

Cryptocurrencies

Bitcoin fell by 0.3% to $62,856.63
Ether rose by 3.1% to $2,543.12

Stock Fluctuations in the Last Minutes of the Big Options Day

Stock Fluctuations in the Last Minutes of the Big Options Day

Related Topics