US stocks traded lower Friday as more than $2 trillion in stock-linked options expired as investors digested more aggressive comment from the Federal Reserve.
How are stock index futures traded?
The Dow Jones Industrial Average DJIA,
fell 265 points, or 0.8%, to 33,729.
The S&P 500 SPX,
fell 48 points, or 1.1%, to 4,234.
The Nasdaq Composite fell 223 points, or 1.7%, to 12,743.
On Thursday, the S&P 500 SPX,
rose 0.2% to 4,283.74, the Dow Industrials DJIA,
rose less than 0.1% to close at 33,999.04 and the Nasdaq Composite COMP,
won 0.2% to finish at 12,965.34.
What drives markets?
Friday will not feature key economic data from the US, forcing investors to deal with the monthly expiration of $2 trillion in stock and index options and comments from Federal Reserve officials.
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Treasury yields climbed Friday as investors returned to believe that the Fed’s big rate hikes were not over yet, with the 10-year TMUBMUSD10Y yielding the same rate.
up 5 basis points to 2.913% and the 2-year TMUBMUSD02Y,
an increase of 3 basis points to 3.238%.
Interest-rate sensitive technology stocks seemed poised to take the brunt, with the Nasdaq leading the market lower. The tech-heavy index is heading for a weekly decline of 0.6%, while the S&P 500 is clinging to positive territory after both indices ended last week with a fourth consecutive win, their longest weekly streak since November 2021.
Meanwhile, investors also estimate the increasing likelihood that the Federal Reserve will raise interest rates by 75 basis points at its meeting in September.
St. Louis Fed President James Bullard told The Wall Street Journal on Thursday that he would be “nouncing” a 75 basis point increase in September. Investors also heard more cautious comments from Kansas City Fed President Esther George, who said how quickly the increases will happen is still up for debate.
On Friday morning, Richmond Fed President Tom Barkin said that while the Fed will “do whatever it takes” to bring inflation back to its 2% target, “returning to normal will not require a catastrophic decline in economic activity. “
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As US retailers finish reporting their second quarter results, investors are turning their attention to what Fed Chair Jerome Powell will say next week at the Fed’s annual economic symposium in Jackson Hole, Wyo.
“I think everyone’s just waiting for Jackson Hole, so I think there’s going to be a lot of speculation about what Powell is going to say in the next five days,” said Brad Conger, deputy chief investment officer at Pennsylvania-based Hirtle Callaghan. Co., which oversees approximately $20 billion in assets, primarily on behalf of university endowments.
The picture from economic data this week was mixed as retail sales were flat, while Wall Street received disappointing results from Target TGT,
and Kohl’s KSS,
But Thursday released data showing weekly jobless claims fell by 2,000 to 250,000, with no signs of mass layoffs.
Which companies are central?
Bed, Bath & Beyond Inc.
shares fell 40% after investor Ryan Cohen confirmed he sold his entire stake in the retailer and made a profit of more than $58 million.
Shares of Deere & Co.
fell 3.5% after the tractor manufacturer reported fiscal third quarter profit that beat expectations due to higher costs and production inefficiencies, but revenues beat forecasts.
Shares of Foot Locker Inc. FL,
rose 22% before the market opened on Friday, boosted by the sneaker retailer’s second-quarter results.
How are other assets traded?
Crude oil prices fell in line with stock futures. West Texas Intermediate raw CL.1,
for September fell 6 cents, or 0.1%, to $90.05 a barrel, while Brent BRN00,
fell 42 cents, or 0.4%, to $96.29 a barrel.
The US dollar index DXY,
climbed 0.5% to 107.98 as investors sought out assets.
The price of gold fell, with December futures for the precious metal GCZ22,
down $7.70, or 0.4%, to $1,763.30 an ounce.
was down 8% to $21,440 and headed for what could be its biggest loss in two months.