U.S. stocks traded lower on Friday as more than $2 trillion in stock-linked options expired, as investors digested more hawkish comments 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.
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
gained 0.2% to end at 12,965.34.
What drives the markets?
Friday will be devoid of major economic data from the United States, leaving investors to contend 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 on Friday as investors returned to the idea that the Fed’s steep interest rate hikes were not over, with the 10-year yield BX:TMUBMUSD10Y
up 5 basis points to 2.913% and the 2-year BX:TMUBMUSD02Y
up 3 basis points to 3.238%.
Interest-rate-sensitive tech stocks looked poised to bear the brunt, with the Nasdaq leading the market lower. The tech-heavy index was heading for a weekly decline of 0.6%, while the S&P 500 clings to positive territory, after both indexes ended last week with a fourth straight win, their most long weekly streak since November 2021.
Meanwhile, investors are also pricing in the growing likelihood of the Federal Reserve raising interest rates by 75 basis points at its September meeting.
St. Louis Fed President James Bullard told the Wall Street Journal on Thursday that he would “lean toward” a 75 basis point hike in September. Investors also heard more cautious comments from Kansas City Fed President Esther George, who said the speed at which the increases will occur remains up for debate.
Speaking on Friday morning, Richmond Fed Chairman Tom Barkin said that while the Fed “will do what it takes” to bring inflation back towards its 2% target, “the return to normal will not does not require a calamitous fall in economic activity”.
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Now that U.S. retailers have finished reporting second-quarter earnings, investors are focused on what Fed Chairman Jerome Powell will say at the Fed’s annual economic symposium in Jackson Hole, Wyo, next week.
“I think everyone is just waiting for Jackson Hole, so I think there will be a lot of speculation about what Powell is going to say over the next five days,” said Brad Conger, deputy chief investment officer at Hirtle Callaghan & based in Pennsylvania. Co., which oversees approximately $20 billion in assets, primarily on behalf of university endowments.
The economic data picture this week was mixed, with retail sales flat, while Wall Street received disappointing results from Target TGT
and Kohl’s KSS.
But data on Thursday showed weekly jobless claims fell by 2,000 to 250,000, with no signs of mass layoffs.
Which companies are targeted?
Bed, Bath and Beyond Inc.
shares fell 40% after investor Ryan Cohen confirmed he had 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 maker reported fiscal third-quarter profit that beat expectations, due to higher costs and production inefficiencies, but its revenue beat forecasts.
Shares of Foot Locker Inc.. Florida
rose 22% before market open on Friday, boosted by the sneaker retailer’s second-quarter results.
How are other assets trading?
Crude prices fell in line with stock futures. West Texas Intermediate Crude CL
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 DXY US Dollar Index
climbed 0.5% to 107.98 as investors sought safe-haven assets.
Gold prices fell, with December futures on the precious metal GCZ22
falling $7.70, or 0.4%, to $1,763.30 an ounce.
fell 8% to $21,440 and was heading for what could be the biggest loss in two months.