Dow slumps and S&P 500, Nasdaq erase week-to-date gains amid ‘quad witching’ and weak consumer-sentiment reading

U.S. stock benchmarks were under selling pressure Friday, with bearish momentum gathering steam, as a reading on consumer sentiment held close to a roughly 10-year low last seen in August.

Investors also were braced for potential volatility from simultaneous options expiries due later in the session, known colloquially on Wall Street as quadruple witching.

How are stocks trading?
  • The Dow Jones Industrial Average

    shed 190 points to 34,558, a decline of 0.6%.

  • The S&P 500 index

    was trading 38 points, or 0.8%, lower at about 4,436, with the index briefly slipping below its 50-day moving average at 4,436.67.

  • The Nasdaq Composite Index

    declined 139 points, or 0.9%, to around 15,042.

On Thursday, the Dow industrials

closed down 63.07 points, or 0.2%, to 34,751.32, the S&P 500

ended down 6.95 points, or 0.2%, to 4,473.75, while the Nasdaq Composite

rose 20.39 points, or 0.1%, to finish at 15,181.92.

For the week, the Dow is flat. erasing an earlier 0.4% gain, the S&P 500 off 0.3%, while the Nasdaq Composite was trading 0.4% lower on the week.

What’s driving the market?

The bears were out in numbers on Friday, with downside momentum, wiping out weekly gains for the three main indexes, amid whipsawing action throughout the five-session trading stretch.

Declines on Wall Street accelerated somewhat following the University of Michigan’s gauge of consumer sentiment, which rebounded slightly to a preliminary September reading of 71 from a final August reading of 70.3, above consensus estimates for 72.

However, the reading remains close to the roughly 10-year low seen in August, with consumers feeling worse about the economy today than at any point during the COVID-19 pandemic.

Consumer sentiment is drawing more attention than it ordinarily would because of the significance of consumer behavior on the economic recovery from the pandemic.

“Consumer Sentiment is still in the gutter, but consumers’ anxiety isn’t reflected much in consumer spending,” wrote Robert Frick, corporate economist with Navy Federal Credit Union, in emailed comments.

“We had surprisingly strong retail sales numbers released yesterday, and while spending on certain services is being hurt by the delta wave, services spending is still healthy and remains above pre-pandemic levels,” he wrote, adopting an optimistic tone.

Indeed, data earlier this week showed stronger-than-expected U.S. August retail sales, but a jump in weekly jobless benefit claims, all ahead of next week’s two-day Federal Open Market Committee policy meeting.

Adding to the market’s volatility may be Friday’s “quad witching,” the simultaneous expiration of individual stock options, stock-index options, stock-index futures and single-stock futures.

Muddling the picture for some investors weighing the all-important gathering of the rate-setting Federal Open Market Committee is that data has otherwise been healthy enough to justify ending pandemic programs and monetary policies that have been market supportive.

“Stronger-than-expected data seemed to have fueled Fed tapering expectations rather than the bulls’ appetite,” said Ipek Ozkardeskaya, senior analyst at Swissquote, who notes that sentiment feels mixed.

And: Fed interest rate increase outlook due next week carries risk of hawkish surprise

Read: When the Fed finally steps back, can the U.S. stock and bond markets stand on their own legs?

And while While Street firms have expressed nervousness as stocks ground higher in recent months, Ozkardeskaya said a correction is being prevented by “the fear of missing out on a further rally in equities, the so-called FOMO, and the fact that there is no alternative, the so-called TINA.”

While the U.S. 10-year yield is now around 1.38%, an advance to 2% that many forecast earlier this year has yet to happen, the analyst said, adding that “the high inflationary pressures leave investors with no place to go but the equities. Therefore, the U.S. indexes will continue claiming new highs in the coming sessions.”

Read: Will high inflation kill the bull market in stocks? History says probably not

On the COVID front, a group of independent advisers to the U.S. Food and Drug Administration will meet on Friday to review and vote on whether vaccinated Americans should get booster shots. While companies such as Pfizer Inc.

and Moderna Inc.

say the boosters are needed, scientists have cited a lack of evidence to support that rollout.

Which companies are in focus?
  • Shares of Invesco

    were up 4.5% after The Wall Street Journal, citing sources, reported that the investment management group is in merger talks with State Street Corp.’s

    asset-management unit. State Street shares were off 3%.

  • Archer Aviation Inc.’s stock ACHR was trading 2.1% lower on the NYSE on Friday, after the completion of the all-electric vertical takeoff and landing (eVTOL) aircraft maker’s merger with special-purpose acquisition company (SPAC) Atlas Crest Investment Corp. 

  • Shares of Lincoln Financial Group LNC were in focus Friday, after the insurer announced an agreement with Resolution Life subsidiary Security Life of Denver Insurance Co., to reinsure about $9.4 billion of executive benefit and universal life reserves. Its stock was up 2%.

  • Shares of Diamondback Energy Inc. FANG was drawing attention in Friday trade, after the oil-and-gas company announced a new $2 billion stock repurchase program. Its stock was up 3.2%.

  • Shares of Take-Two Interactive Software IncTTWO were down 0.6% after BMO Capital Markets analyst Gerrick Johnson downgraded the stock to market perform from outperform.

  • Shares of cybersecurity company IronNet Inc.

    were tumbling 20%, but were still up 64% on the week.

How are other assets trading?
  • The yield on the 10-year Treasury

    note rose 4 basis point to 1.38%.

  • The ICE U.S. Dollar Index
    a measure of the currency against a basket of six major rivals, was trading 0.3% higher at 93.21 and on track for a 0.7% weekly gain.

  • Oil futures continued to retreat from a seven-week high, with the U.S. benchmark

    down 1% to $71.88 a barrel but on track for a weekly gain of 3.1%. Gold futures

    traded 0.3% lower to $1,751.80 an ounce, down 2.2% for the week, and on track for a second straight weekly decline.

  • In European equities, the Stoxx Europe 600 index

    fell 0.9% and ended 1% lower on the week and the FTSE 100

    slumped 0.9% on the session and notched a 0.9% weekly slide.

  • In Asia, the Shanghai Composite

    rose 0.2%, but booked a 2.4% weekly drop, Hong Kong’s Hang Seng Index

    gained 1% but finished the week 4.9% lower and the Japan’s Nikkei 225 index

    rose 0.6%, contributing to a 0.4% weekly gain.

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