(Bloomberg) — Stocks fell at the end of a volatile week as tech stocks sold off and a pile of options expiring on Friday amplified market volatility.
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Every quarter, Wall Street faces an ominous phenomenon known as triple witching, when derivatives contracts related to stocks, index options, and futures expire, causing traders to roll over existing positions or take new positions en masse. was forced to start a new position. About 19 billion shares moved to U.S. exchanges. This is approximately 60% higher than the three-month average trading volume.
“It’s a very difficult day to predict the direction of the market,” said Matt Maley of Miller Tabak. “‘Inside’ is too biased to tell us anything once it expires. It’s important that investors don’t take advantage of today’s actions when trying to decipher what will happen in the market next week and beyond.” It will be.”
About $5.3 trillion was scheduled to expire on Friday, according to Rocky Fishman, founder of derivatives analysis firm Asim500. This US options event came at a critical juncture for market positioning ahead of next week’s Federal Reserve policy meeting. The recent acceleration in inflation has intensified debate over how much easing authorities will show in the lead-up to 2024.
The S&P 500 index fell below 5,120, and the tech-heavy Nasdaq 100 index fell more than 1%. Adobe Inc. fell due to weak sales outlook. Nvidia Corp. snapped its 10th straight week of gains with its artificial intelligence conference just days away. The 10-year US Treasury bond had its worst week of the year.
“This week has been extremely chaotic on multiple fronts,” said Florian Hierpo of Lombard Odier Asset Management. “A stream of macroeconomic news reveals that while the U.S. economy is unexpectedly slowing, inflation is slowing at a more modest pace. Instead, we fully embrace the inflation narrative.”
Interest rate swap traders have pushed bets on the timing of the Federal Reserve’s first quarter-point rate cut in time for its central bank meeting in July. The agency last issued a quarterly forecast in December, projecting a three-quarter point decline in 2024, and is scheduled to release an updated version of that forecast, known as a dot plot, on March 20.
Economists at JPMorgan Chase & Co. have revised their forecast for the Fed’s monetary policy rate cuts for all of 2024 to 75 basis points (bp). Previously, a total of 125 basis points (bp) was expected.
The glide path to the Fed’s 2% inflation target will be anything but smooth, and the last mile to the finish line will take some time, making it difficult to measure progress, said Carol Schleif of the BMO family office. It is likely that more data will be needed.
“The earliest rate cut could be in June, but if the data continues to be strong, as has been the case recently, I wouldn’t be surprised if the rate cut is pushed to later this year,” he said. “Our base case is a total of three rate cuts in 2024, but if economic indicators show unexpected upside, the Fed could reduce the number of rate cuts further.”
Barclays’ strategists led by Emmanuel Cau said the stock market’s rally could slow if the Fed becomes more hawkish next week and signals fewer interest rate cuts than expected due to the persistence of inflation. .
“Investors continue to see the soft landing story as half-full as the Fed has so far supported current market prices with three rate cuts since June,” they said. writing.
Investors are ignoring the risk of stagflation, leading to record flows into U.S. stocks, according to Bank of America.
U.S. equity funds gained $56 billion in the week ending March 13, strategist Michael Hartnett said in a note, citing EPFR Global. Technology stocks had the biggest inflows among the sectors, rebounding from record outflows to $6.8 billion.
Hartnett said: “The arrival of a new round of stagflation has led to outperformance in gold, commodities, cryptocurrencies and cash, a significant steepening of the yield curve, and a very contrarian equity barbell in resources and defense. means,” he said.
Company highlights:
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Nippon Steel has said it is determined to complete its $14.1 billion acquisition of United Steel Corp., even after President Joe Biden said the company should remain in U.S. hands.
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Days after U.S. buyout firm Elliott Investment Management also withdrew, JDCOM announced it would not make a takeover offer for British electronics retailer Currys.
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Binance Holdings Ltd. has tightened requirements for listing new digital tokens and stepped up efforts to strengthen investor protection on its platform.
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Boeing sent a so-called multi-operator message to operators of its 787 jetliner following an in-flight accident involving a long-range jetliner several days ago. The aircraft lost altitude briefly and rapidly, injuring multiple people. board.
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United Airlines Holdings Inc. is close to securing at least 30 Airbus A321neo aircraft from aircraft leasing companies to replace Boeing Co.’s 737 Max 10 order, which is at least five years behind schedule, people said. That’s what it means.
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Madrigal Pharmaceuticals’ drug Rezdifla becomes the first to win U.S. approval for the treatment of a potentially fatal liver disease that affects millions of people worldwide, where some larger rivals have failed. I was successful in my field.
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Reckitt Benckiser Group Inc. plunged after a jury awarded $60 million in damages to an Illinois woman after its Enfamil infant formula caused the death of a premature baby.
The main movements in the market are:
stock
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As of 4 p.m. New York time, the S&P 500 was down 0.7%.
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Nasdaq 100 fell 1.1%
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The Dow Jones Industrial Average fell 0.5%.
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MSCI World Index falls 0.7%
currency
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Bloomberg Dollar Spot Index rose 0.2%
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The euro was almost unchanged 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 yen to the dollar.
cryptocurrency
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Bitcoin fell 2.9% to $68,640.2.
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Ether fell 4.4% to $3,672.6.
bond
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The 10-year Treasury yield rose 2 basis points to 4.31%.
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Germany’s 10-year bond yield rose 2 basis points to 2.44%.
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The UK 10-year bond yield rose 1 basis point to 4.10%.
merchandise
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West Texas Intermediate crude oil fell 0.3% to $80.99 a barrel.
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Spot gold fell 0.2% to $2,157.30 an ounce.
This article was produced in partnership with Bloomberg Automation.
–With assistance from Lu Wang, Carter Johnson, and Farah Elbahrawy.
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