By Mark DeCambre and Chris Matthews, MarketWatch
Quadruple witching day on Wall Street
U.S. stocks edged mostly higher midday Friday, with the Dow and
S&P just shy of all-time highs as investors looked beyond a
litany of central-bank decisions of the past week and focused on
signs of improving China-U.S. trade developments.
Traders were also on the watch for any effects of "quadruple
witching day" on Wall Street, the simultaneous quarterly expiration
of stock-index futures contracts, single-stock futures, and options
on stock-index futures and individual stocks, which often spurs
higher volumes.
The S&P 500 index remains within 1% of its July 26 closing
record but the Nasdaq Composite slipped as Netflix Inc. weighed on
the technology heavy gauge.
How are markets performing?
The Dow Jones Industrial Average rose 37 points, or 0.1%, at
27,131, the S&P 500 index rose 2 points, or 0.1%, to 3,009,
while the Nasdaq Composite Index fell 20 points to reach 8,162, a
decline of 0.3%.
On Thursday
(http://www.marketwatch.com/story/dow-set-to-edge-lower-as-wall-street-weighs-feds-monetary-policy-path-2019-09-19),
the Dow fell 52.29 points, or 0.2%, to end at 27,094.79, while the
S&P 500 index clung to a gain of 0.09 point, or less than 0.1%,
to close at 3,006.82. The Nasdaq Composite Index added 5.49 points,
or 0.1%, finishing at 8,182.88. The S&P 500 traded as high as
3,021.99 earlier Thursday -- within striking distance of its
all-time closing high of 3,025.86 set on July 26.
What's driving the market?
Wall Street stocks were trending upward to end the week, with
reports that President Donald Trump was exempting hundreds of
Chinese products from tariffs.
(https://www.foxbusiness.com/economy/trade-war-us-exempts-more-than-400-chinese-goods-from-tariffs)
The exemptions also come as lower-level Washington and Beijing
delegates are meeting for a second day to set the stage for more
substantive tariff talks in early October. Two negotiating sessions
over the two days will cover agricultural issues, while just one
will be devoted to the strengthening of China's intellectual
protections and forced transfer of U.S. technology to Chinese
firms, Reuters reported
(https://www.reuters.com/article/us-usa-trade-china/u-s-chinese-trade-deputies-face-off-in-washington-amid-deep-differences-idUSKBN1W40E1).
Some of the Chinese delegation will visit US farming regions next
week, though China's Global Times and White House adviser Michael
Pillsbury expressed caution about the prospects for a deal on
Thursday.
In addition to quadruple witching, the S&P 500 index,
S&P 400 and Sox Semi index will rebalance Friday as well.
"Friday should be a massive liquidity day for equities markets
due to quad witching and the rebalancing of several major index
families, pensions planning to rebalance could use this as a prime
opportunity to trade into (or out of) positions ahead of
month-end," wrote Dave Lutz, head of ETF Trading at JonesTrading,
in a Friday note.
"With the S&P 500 outperforming on both a monthly and
quarterly basis versus other asset classes, this results in a
current projection of $17 billion in selling of U.S. equities from
pension funds," he added.
Investors are also pondering the direction of Federal Reserve
monetary policy after a quarter percentage point interest rate cut
on Wednesday.
On Friday St. Louis Federal Reserve President James Bullard
explained his dissent
(http://www.marketwatch.com/story/feds-bullard-dissent-was-due-in-part-to-worries-about-slowing-economy-2019-09-20)from
the Federal Open Market Committee's decision on Wednesday to reduce
rates, saying he advocated for a more substantial 50 basis-point
cut because he thinks the manufacturing sector already appears to
be in recession.
Boston Fed President Eric Rosengren, on the other hand, was one
of two hawkish dissenters at the recent meeting, and he explained
his opposition to rate cuts
(https://www.bostonfed.org/news-and-events/press-releases/2019/eric-s-rosengren-dissenting-statement.aspx)
in a Friday statement, arguing that additional monetary stimulus
would risk inflated asset prices and increased leverage.
"Additional monetary stimulus is not needed for an economy where
labor markets are already tight, and risks further inflating the
prices of risky assets and encouraging households and firms to take
on too much leverage," he wrote.
Fed vice chair Richard Clarida defended this week's interest
rate cut
(http://www.marketwatch.com/story/feds-clarida-says-us-economy-is-fine-but-global-outlook-is-getting-worse-2019-09-20)on
Friday though, arguing that the U.S. economy remains in a good
place but the global picture is worsening.
In recent weeks, monetary stimulus by central banks around the
world has helped to ease fears about slowing global economic
growth, but liquidity remains an issue for U.S. money markets given
the deluge of U.S. Treasury borrowing to fund a widening fiscal
deficit this year. The New York Fed outlined a schedule on Friday
(http://www.marketwatch.com/story/fed-plans-to-conduct-daily-repo-operations-until-october-10-2019-09-20)that
would see it conduct daily repurchasing operations through October
10 to provide money market liquidity.
Which stocks are in focus?
Shares of Apple Inc. (AAPL) were up 0.2% Friday morning, as the
new iPhone 11 goes on sale for the first time in stores. J.P.
Morgan analyst Samik Chatterjee said that healthy preorders
(http://www.marketwatch.com/story/apples-stock-gains-with-analysts-upbeat-as-iphone-11-hits-stores-2019-09-20)
for the product indicates a "robust" trend for iPhone revenue. The
gains led Apple to reclaim a trillion-dollar valuation during early
Friday trade.
Netflix Inc. (NFLX) stock fell 5.9%, putting it on track for its
third consecutive loss, after falling 2.4% and 1.7% Wednesday and
Thursday, respectively. CEO Reed Hastings warned investors at a
conference Friday
(http://www.marketwatch.com/articles/netflix-stock-slumps-after-its-ceo-warns-tough-competition-is-coming-from-disney-apple-51568993051)
that "While we've been competing with many people in the last
decade, it's a whole new world starting in November . . . It'll be
tough competition."
Shares of McDermott International Inc. (MDR) soared 68% Friday
morning, after the energy-services company said it was exploring a
sale of its Lummus Technology business
(http://www.marketwatch.com/story/mcdermotts-stock-rockets-after-exploring-sale-of-lummus-tech-business-valued-at-over-25-bln-2019-09-20),
which has been valued at $2.5 billion. McDermott's market cap sat
at 287.1 million as of Thursday's close. The stock plummeted 73%
week-to-Thursday's close over concerns that the firm was
considering bankruptcy.
How are other markets trading?
In commodities, oil futures rose, with West Texas Intermediate
crude for October delivery on the New York Mercantile Exchange rose
1.7%, to trade at about $59 a barrel.
Gold rose 0.3% to trade at about $1,510.9 an ounce, while the
U.S. dollar, as measured by the ICE U.S. Dollar Index , a gauge of
the buck against a basket of leading rivals, edged 0.3% higher.
The 10-year U.S. note was little changed at 1.773%, while the
2-year fell three basis points to 1.710%.
(END) Dow Jones Newswires
September 20, 2019 11:57 ET (15:57 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.