U.S. Stock Futures Waver as Investors Brace for Volatile Trading
September 18 2020 - 08:45AM
Dow Jones News
By Caitlin Ostroff
U.S. stock futures wavered Friday ahead of the simultaneous
expiration of an array of stock futures and options contracts that
could result in increased volatility.
Futures tied to the S&P 500 wavered between losses and
gains. The benchmark may still be on track to eke out a tepid gain
for the week, despite two consecutive days of declines. Contracts
tied to the tech-heavy Nasdaq Composite ticked up 0.5%.
The occurrence of so-called quadruple witching -- when both
futures and options linked to individual stocks and stock indexes
expire on the same day -- means investors are braced for a choppy
session. A surge in options trading targeted at giant technology
stocks by both small and large investors has also been magnifying
the market's ups and downs in recent days.
"It is normally a day where you're glued to your screen and
you're watching for volatility," said Altaf Kassam, head of
investment strategy for State Street Global Advisors in Europe.
"We've had an abnormal amount of options on single stocks, so you
might see some movement in single stocks."
Big swings in some of the major technology stocks on Friday
could also lead to volatility in the benchmark indexes, which are
dominated by the so-called FAANG stocks, made up of Facebook,
Apple, Amazon.com, Netflix and Google parent Alphabet, he said.
Ahead of the bell in New York, shares in Oracle fell 1.4% after
the Trump administration said Friday it will block U.S. users from
downloading WeChat starting Sunday and could order a similar ban
for TikTok by Nov. 12, citing national security concerns. Under the
latest plan for a majority U.S. ownership of Chinese-owned
video-sharing app TikTok, Oracle and Walmart could together own a
significant stake.
Analysts said investors are watching for progress in Covid-19
vaccine trials and monitoring economic data to assess how much
stocks can climb, following a rebound from March lows.
"If you think about it, we've had all the easy gains," said Mr.
Kassam. "It's going to get incrementally harder for us to keep
pushing up that hill."
Investors will also be watching for fresh data gauging how
Americans view the economy when the University of Michigan
publishes preliminary figures for its September survey at 10 a.m.
ET.
Also on Friday, lawmakers are aiming to unveil a bipartisan
spending bill averting a government shutdown next month. Democrats
and Republicans remain at an impasse over another round of
coronavirus relief despite President Trump's renewed interest in a
deal.
The breakdown in negotiations has disappointed some investors
who expected another relief package would lend more spending power
to Americans and boost economic recovery. Additional support could
bolster consumer spending, which powers two-thirds of the U.S.
economy.
Markets have taken a damper this week after the Federal Reserve
said the U.S. economic outlook remains highly uncertain. Some
investors were disappointed that the central bank didn't offer more
guidance around additional stimulus measures or specifics about its
inflation targets.
Speculation that the Fed would keep interest rates near zero for
some years, resulting in low bond yields, has been encouraging many
people to move funds into riskier assets for some month. That has
led to a rally in stocks.
"This is a once-in-a-generation ability to make money," said
Patrick Spencer, managing director at U.S. investment firm Baird.
"That announcement from the Fed was very powerful, and it's going
to try and inflate inflation and that's good for stocks."
The yield on the 10-year Treasury ticked down to 0.674%, from
0.682% Thursday. Yields rise when prices fall.
Overseas, the pan-continental Stoxx Europe 600 was largely flat.
Among individual equities, shares in Euronext NV rose 5.4% after
the London Stock Exchange Group said Friday that it has entered
into exclusive talks with the exchange operator over the sale of
Italy's Borsa Italiana.
In Asia, China's Shanghai Composite Index led regional gains,
with a more than 2% rise by the close of trading, helped by rallies
in financial stocks. State-owned China Life Insurance and New China
Life Insurance both surged by 10%, the maximum daily gain allowed,
as did broker Zheshang Securities.
Foreign investors have added to their holdings of Chinese
stocks, helping bolster the yuan, which in recent days has hit its
strongest levels against the dollar since May 2019. The Chinese
currency strengthened slightly on Friday to 6.7592 a dollar.
Elsewhere, major indexes in Hong Kong, Japan and South Korea
advanced less than 0.5%, while the Australian benchmark fell
slightly.
--Joanne Chiu in Hong Kong contributed to this article.
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com
(END) Dow Jones Newswires
September 18, 2020 08:30 ET (12:30 GMT)
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