U.S. stocks moved lower Friday, amid quarterly options expirations and worries over the Russia-Ukraine war, but the S&P 500 was still looking at its strongest weekly gain since November 2020.
Volatility in markets has become the norm this month as investors struggle to forecast economic growth and corporate profitability amid high inflation, rising interest rates from central banks around the world, Russia’s invasion of Ukraine, and ongoing lockdowns to combat Covid-19 in China.
How are stock indexes trading?
- The Dow Jones Industrial Average DJIA,
-0.34%fell 171 points, or 0.5%, to 34,309.
- The S&P 500 SPX,
-0.03%shed 11 points, or 0.2%, to 4,401.
- The Nasdaq Composite COMP,
+0.60%was down 27 points, or 0.2%, at 13,588.
On Thursday, the Dow Jones Industrial Average rose nearly 420 points, or 1.2%, while the S&P 500 closed up 1.2% and the Nasdaq Composite advanced 1.3%.
What’s driving the markets?
All three major U.S. indexes remained set for big weekly gains, with the S&P 500 up nearly 5% and the Dow industrials gaining 4.6% for the week through Thursday. The gain for the S&P 500 would be its strongest since the week ended Nov. 6, 2020, according to Dow Jones Market Data. The Nasdaq has gained 6% as investors have jumped back into technology stocks.
Investors were weighing hawkish comments from central bankers. St. Louis Federal Reserve President Jim Bullard said the central bank risked losing credibility by moving too slowly to bring inflation down. Bullard, in a statement, explained his lone dissent at Wednesday’s Fed meeting, when he called for a 50 basis-point rise in the fed-funds rate rate. Bullard said he wants to see key rates at 3% by year-end.
Fed Gov. Chris Waller, meanwhile, called for the Fed to front-load rate increases.
At its meeting this week, the Fed increased benchmark interest rates by 25 basis points as expected, promising more, with Fed Chairman Jerome Powell cheering investors with an optimistic view of the economy. U.S. data for Friday includes existing home sales and leading indicators, both for February.
Investors had previously been encouraged by signs of potential progress between Ukraine and Russian negotiators, but those hopes were fading some ahead of the weekend. U.S. Secretary of State Antony Blinken reportedly said in a briefing Thursday that a diplomatic solution to the war in Ukraine was looking challenging, as Russia shows no signs of letting up its attacks.
“It’s becoming increasingly obvious that Russia’s interest in a negotiated agreement probably doesn’t extend beyond optics, and that it isn’t serious about a cessation of hostilities,” said Michael Hewson, chief market analyst at CMC Markets, in a note to clients.
“There is also the added complication that any cease-fire would require a major climbdown from one side or the other, and with their respective positions still being miles apart, and Russia still targeting civilians, an imminent de-escalation doesn’t look likely at this point,” he said.
Fresh attacks by Russian forces hit the western city of Lviv and the capital Kyiv. Its forces have been blamed for an attack this week on a theater in devastated Mariupol serving as a shelter and clearly been marked as “children inside.”
And new report by the U.S. Defense Intelligence Agency warned that an increasingly desperate President Vladimir Putin could threaten the West with nuclear weapons to try to turn the tide, Bloomberg News reported.
President Joe Biden is expected to warn his China counterpart Xi Jinping that providing military or economic assistance for Russia’s Ukraine invasion will lead to severe consequences.
Friday also marks a “massive” quarterly options expirations on Friday for derivatives such as options on equity futures, noted the Saxo Bank Strategy team. “Hedging related to derivatives with some $3.5 trillion in underlying exposure could explain some of the price action in U.S. equity markets this week ahead of today’s options expiration,” they said in a note to clients.
“In addition, options with strike prices near the current S&P level are said by some sources to be the largest in years,” the strategists said.
What companies are in focus?
- FedEx FDX,
-4.47%reported a weaker-than-forecast fiscal third quarter result and kept its annual outlook mostly unchanged. Shares fell more than 5%.
- Meme-stock videogame retailer GameStop GME,
+0.88%swung to a surprise loss in the fourth quarter. Shares fell 6.6%.
- Moderna MRNA,
+5.55%shares rose 3.3. The pharmaceutical group asked the Food and Drug Administration on Thursday to authorize a fourth shot of its COVID-19 vaccine as a booster dose for all adults.
How are other assets trading?
- U.S. crude futures CL00,
-0.83%CL.1, +0.59%CLJ22, +0.59%rose 1.3% to trade around $103 a barrel.
- The yield on the 10-year Treasury note TMUBMUSD10Y,
2.148%dropped 3 basis points to 2.158%. Yields and debt prices move opposite each other.
- The ICE U.S. Dollar Index DXY,
+0.37%, a measure of the currency against a basket of six major rivals, rose 0.7%.
- Gold futures GC00,
-0.59%fell 0.5% to trade near $1,932 an ounce.
- Bitcoin BTCUSD,
-0.07%was down 1.5% to trade below $41,000.
- The Stoxx Europe 600 SXXP,
+0.22%fell 0.3% while London’s FTSE 100 UKX, -0.18%dropped 0.3%.
- Hong Kong’s Hang Seng Index HSI,
-0.41%fell 0.4%, while the Shanghai Composite SHCOMP, +1.12%rose 1.1% and Japan’s Nikkei 225 NIK, +0.65%advanced 0.7%.