The market mood appears to have soured as the index futures slid early Friday, which is expected to be volatile due to the triple witching phenomena. There could be a lack of incentive to buy for want of any major Main Street catalysts, as some economists have begun flashing the danger of a hard landing. Negative reaction to earnings released late Thursday may also serve as a dampener
Triple-witching refers to the simultaneous expiration of stock options, index options and index futures contracts, and the session is marked by increased volume and high volatility. This quarterly event will see some $5.1 trillion worth of options tied to individual stocks, indexes and exchange-traded funds fall off the board, Bloomberg reported, citing data analytics firm Asym 500.
| Futures | Performance (+/-) |
| Nasdaq 100 | -0.22% |
| S&P 500 | -0.34% |
| Dow | -0.03% |
| R2K | -0.31% |
In premarket trading on Friday, the SPDR S&P 500 ETF Trust SPY fell 0.18% to $568.21 and the Invesco QQQ ETF QQQ slipped 0.31% to $481.86, according to Benzinga Pro data.
Cues From Last Session:
Pent-up buying perked up on Wall Street on Thursday, as risky bets rallied across the board, led by tech stocks, following the Fed’s first rate cut in about 4-1/2 years. Traders also drew comfort from a few positive economic data, including an unexpected drop in weekly jobless claims, the Philadelphia regional manufacturing activity unexpectedly turning to expansion territory and a smaller-than-expected drop in Conference Board’s leading economic index.
The S&P 500 Information Technology Index ended the day up 3.08%, while consumer discretionary and communication technology stocks also rose sharply. On the other hand, safe-haven consumer staples, utility and real-estate stocks pulled back modestly.
The major averages gap opened higher and moved roughly sideways before ending the session notably higher. The Nasdaq Composite Index ended at its highest level since July 16 and the S&P 500 Index ended at a fresh high and in the process scaled a new intraday high.
The 30-stock Dow Jones Industrial Average also hit new intraday and closing highs, as it went past the psychological resistance of 42,000 for the first time.
Making sense of Thursday’s market rally, Jamie Cox, Managing Partner at Harris Financial Group, said, “Markets like rate cuts, especially big ones when the economy is strong.”
| Index | Performance (+/) | Value |
| Nasdaq Composite | +2.51% | 18,013.98 |
| S&P 500 Index | +1.70% | 5,713.64 |
| Dow Industrials | +1.26% | 42,025.19 |
| Russell 2000 | +2.10% | 2,252.71 |
Insights From Analysts:
Fund manager Louis Navellier said the economic risk is mitigated with the Fed rate cut and a new dot plot, which suggests more cuts could be in the offing this year. The housing sector also seems to be firming up, he said. Much of the economic uncertainty has been eliminated and so all investors have left to stress about is political uncertainty, he added.
Chief Global Strategist of BCA Research Peter Berezin said the 50 basis-point cut and another 50 bps reduction the central bank is penciling in before the year-end may not ensure a soft landing.
The economist noted that the Fed lowered rates by a cumulative 100 bps from Jan. to March 2001 and a recession started a month later, and the central bank implemented a cut of similar magnitude between Sept. 2007 – Dec. 2007 only for the Great Recession to begin in Jan. 2008.
Investors may be hoping for a repeat of the 1994-95 episode, when Fed easing paved the way for an economic boom, the economist said. There are at least three differences between then and now, he said. In 1994-95, the tightening was fairly mild, merely a cumulative 300 bps between Feb. 1994 and Feb. 1995, as opposed to the 525 bps increase this time around, he said. Also, unlike then, the unemployment rate is rising now, he added.
The second half of the 1990s saw a “massive disinflationary capex boom” coupled with rapid productivity growth but nothing comparable is evident in the data so far, Berezin said.
Upcoming Economic Data:
- Philadelphia Fed President Patrick Harker, who is a member of the rate-setting committee, is scheduled to speak at 2 p.m. EDT.
See Also: How To Trade Futures
Stocks In Focus:
- FedEx Corp. FDX shares fell over 13% in premarket trading following the company’s first-quarter earnings miss. Lennar Corporation LEN slipped over 2.5% after earnings.
- NIKE, Inc. NKE rose over 6.5% after the company announced John Donahoe will retire as CEO, effective Oct. 13, and Elliott Hill, a former Nike executive who retired in 2020, will return to take over from Donahoe.
Commodities, Bonds And Global Equity Markets:
Crude oil futures slipped after Thursday’s strong rally that took it past the $71-a-barrel level. Gold futures were in record territory despite the dollar coming back up. The 10-year U.S. Treasury note slid 2.5 points to 3.715%. Bitcoin BTC/USD has extended its rally, rising nearly 2% over the past 24 hours. The apex crypto, which topped $64K intraday, has eased off the day’s high and traded a little shy of the $63.5K mark.
Most major Asian markets advanced, with the exception of the Indonesian, New Zealand and Singaporean markets, while European stocks pulled back sharply in early trading after Thursday’s strong gains.
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