(Bloomberg) — Stock prices fell at the end of a tumultuous week as a technology selloff and a slew of options expiring on Friday added to market swings.
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Wall Street experienced a quarterly episode known as “triple witching,” in which derivative contracts tied to stocks, index options and futures expired, forcing traders en masse to roll over existing positions or open new ones. About 19 billion shares changed hands on US stock exchanges. That's about 60% more than the average volume over the last three months.
“It's a day where the direction of the market is very, very difficult to predict,” said Matt Maley of Miller Tabak. “The 'internals' are so distorted by the process that they don't tell us anything. It will be important that investors do not use today’s action to figure out what will happen in the market next week and beyond.”
Around $5.3 trillion was expected to expire on Friday, according to Rocky Fishman, founder of derivatives analysis firm Asym 500. The US options event came at a critical time for market positioning for the Federal Reserve's policy meeting next week. The recent rise in inflation has intensified debate over the extent of easing that officials are announcing for 2024.
The S&P 500 fell below 5,120, while the tech-heavy Nasdaq 100 fell over 1%. Adobe Inc. fell on weak sales outlook. Nvidia Corp. posted a 10th consecutive weekly gain – as the artificial intelligence conference is just days away. 10-year Treasury bonds had their worst week this year.
“This week has been remarkably confusing on several fronts,” said Florian Ielpo of Lombard Odier Asset Management. “The macroeconomic news has made it clear that the US economy is slowing unexpectedly, while inflation is slowing. Instead of focusing on the economic slowdown, markets have fully embraced the inflation narrative.”
The story goes on
Interest rate swap traders are betting on the timing of the Fed's full first quarter-point interest rate cut by the central bank's July meeting. Officials last released quarterly forecasts in December that predicted three quarter-point cuts in 2024. On March 20, they are expected to release an update to these forecasts – called the dot plot.
JPMorgan Chase & Co. economists revised their forecast for Fed policy rate cuts throughout 2024 to 75 basis points. Previously they expected a total of 125 basis points.
According to Carol Schleif of BMO Family Office, the glide path to the Fed's 2% inflation target is anything but smooth and the final step to the finish line will likely require some time and much more data to assess progress.
“The earliest possible cut could occur in June, but we would not be shocked if this moves to later in the year if the data continues to be as hot as recent data,” she noted. “Our base case assumes a total of three rate cuts in 2024, although it is possible the Fed will cut rates even less if economic data surprises on the upside.”
The stock market rally could stall if stubborn inflation prompts the Fed to become more hawkish and announce fewer-than-expected interest rate cuts next week, according to Barclays Plc strategists led by Emmanuel Cau.
“With the Fed so far supporting current market prices for three rate cuts starting in June, investors remain convinced that the soft landing glass is half full,” they wrote.
According to Bank of America Corp. Investors are rejecting the risk of stagflation and driving record inflows into US stocks.
U.S. equity funds received $56 billion in the week ended March 13, strategist Michael Hartnett wrote in a note, citing EPFR Global. Technology stocks saw the largest inflow among sectors at $6.8 billion, recovering from a record outflow.
Hartnett said a “new bout of stagflation means outperformance of gold, commodities, cryptocurrencies and cash, a sharp steepening of the yield curve and a very contrarian equity structure of resources and defense stocks.”
Company highlights:
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Nippon Steel Corp. said it was committed to pursuing the acquisition of United States Steel Corp. deal worth $14.1 billion, even after President Joe Biden said the company should remain in U.S. hands.
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JD.com Inc. said it would not make an offer to British electronics retailer Currys Plc, just days after U.S. buyout firm Elliott Investment Management also pulled out.
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Binance Holdings Ltd. has tightened requirements for listing new digital tokens and is increasing its efforts to strengthen investor protection on its platform.
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Boeing Co. has sent a so-called multi-operator message to operators of the 787 jetliner after an in-flight incident with the long-haul jet a few days ago in which the plane briefly and quickly lost altitude and killed several people were injured plank.
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United Airlines Holdings Inc. is close to securing three dozen or more Airbus A321neo jets from aircraft lessors to replace 737 Max 10 orders from Boeing Co. that are at least five years behind schedule, according to people familiar with the matter .
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Madrigal Pharmaceuticals Inc.'s drug Rezdiffra received the first U.S. approval to treat a potentially fatal liver disease that affects millions of people worldwide, succeeding in an area where some larger rivals have failed.
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Reckitt Benckiser Group Plc collapsed after a jury awarded an Illinois woman $60 million in damages, saying the company's Enfamil baby formula caused the death of her premature baby.
Some of the key moves in the markets:
Shares
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The S&P 500 fell 0.7% as of 4 p.m. New York time
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The Nasdaq 100 fell 1.1%
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The Dow Jones Industrial Average fell 0.5%
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The MSCI World Index fell 0.7%
Currencies
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The Bloomberg Dollar Spot Index rose 0.2%
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The euro was little changed at $1.0889
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The British pound fell 0.1% to $1.2738
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The Japanese yen fell 0.5% to 149.06 per dollar
Cryptocurrencies
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Bitcoin fell 2.9% to $68,640.2
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Ether fell 4.4% to $3,672.6
Tie up
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The 10-year Treasury yield rose two basis points to 4.31%
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The 10-year German government bond yield rose two basis points to 2.44%
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The 10-year UK government bond yield rose one basis point to 4.10%
raw materials
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West Texas Intermediate crude fell 0.3% to $80.99 a barrel
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Spot gold fell 0.2% to $2,157.30 an ounce
This story was produced with support from Bloomberg Automation.
– With assistance from Lu Wang, Carter Johnson and Farah Elbahrawy.
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