By Chris Matthews and Mark DeCambre, MarketWatch , Andrea Riquier
Quadruple witching day on Wall Street
U.S. stocks closed lower Friday, for the first weekly decline in a month, as investors looked beyond a litany of central-bank decisions of the past week and focused on the state of China-U.S. trade talks.
U.S. stocks turned lower in afternoon trade, dragged lower by the technology sector (XLK) and consumer discretionary shares (XLY) after a report that a Chinese delegation had canceled plans to visit farms in Montana as a part of its negotiations with the U.S. delegation.
Traders were also on the watch for any effects of "quadruple witching day" on Wall Street, the simultaneous quarterly expiration of stock-index futures contracts, single-stock futures, and options on stock-index futures and individual stocks, which often spurs higher volumes.
How are markets performing?
The Dow Jones Industrial Average sank 160.60 points, or 0.59%, at 26,934.19, the S&P 500 index declined 14.89 points, or 0.5%, to 2,991.90, while the Nasdaq Composite Index fell 65.20 points to reach 8,117.67, a decline of 0.8%.
What's driving the market?
Wall Street stocks started the trading day higher after reports that President Donald Trump was exempting hundreds of Chinese products from tariffs. (link)
Two negotiating sessions over the two days between the U.S. and Chinese delegations covered agricultural issues and the strengthening of China's intellectual protections and forced transfer of U.S. technology to Chinese firms, Reuters reported (link). Some of the Chinese delegation were to visit US farming regions over the weekend but the Montana Farm bureau tweeted that the visit was cancelled (link).
The cancellation came as U.S.-Chinese trade talks were held in Washington and U.S. President Donald Trump said he wanted a complete trade deal with the Asian nation (link), not just an agreement for China to buy more U.S. agricultural goods.
The U.S. and China have imposed import tariffs on billions of dollars' worth of each country's goods in the past two years, disrupting global manufacturing supply lines, discouraging business investment and slowing economic growth.
Other factors adding some volatility on Friday included "quadruple witching", while the S&P 500 index, S&P 400 and Sox Semi index will rebalance Friday as well.
In the weeks ahead, investors should brace for a return of "August-like" volatility, said Kate Warne, principal investment strategist with Edward Jones. Warne expects stocks to move higher, "but not on a smooth path," she told MarketWatch.
Meanwhile, it's too soon to try to predict the Federal Reserve's next move, Warne said, after the U.S. central bank cut interest rates by a quarter percentage point on Wednesday for the second time this year. A lot will depend on how trade negotiations play out in October, she said. "There are lots of signs the economy is slowing, but very few signs it's slowing quickly."
On Friday St. Louis Federal Reserve President James Bullard explained his dissent (link)from the Federal Open Market Committee's decision on Wednesday to reduce rates, saying he advocated for a more substantial 50 basis-point cut because he thinks the manufacturing sector already appears to be in recession.
Boston Fed President Eric Rosengren, on the other hand, was one of two hawkish dissenters at the recent meeting, and he explained his opposition to rate cuts (link) in a Friday statement, arguing that additional monetary stimulus would risk inflated asset prices and increased leverage.
Fed vice chair Richard Clarida defended this week's interest rate cut (link)on Friday though, arguing that the U.S. economy remains in a good place but the global picture is worsening.
In recent weeks, monetary stimulus by central banks around the world has helped to ease fears about slowing global economic growth, but liquidity remains an issue for U.S. money markets given the deluge of U.S. Treasury borrowing to fund a widening fiscal deficit this year. The New York Fed outlined a schedule on Friday (link)that would see it conduct daily repurchasing operations through October 10 to provide money market liquidity.
Which stocks are in focus?
Apple Inc. (AAPL) shares were up 0.2% Friday morning, as the new iPhone 11 goes on sale for the first time in stores. J.P. Morgan analyst Samik Chatterjee said that healthy preorders (link) for the product indicates a "robust" trend for iPhone revenue. The gains led Apple to reclaim a trillion-dollar valuation during early Friday trade.
Netflix Inc. (NFLX) stock fell 5.9%, putting it on track for its third consecutive loss, after falling 2.4% and 1.7% Wednesday and Thursday, respectively. CEO Reed Hastings warned investors at a conference Friday (link) that "While we've been competing with many people in the last decade, it's a whole new world starting in November . . . It'll be tough competition."
Shares of McDermott International Inc. (MDR) soared 68% Friday morning, after the energy-services company said it was exploring a sale of its Lummus Technology business (link), which has been valued at $2.5 billion. McDermott's market cap sat at 287.1 million as of Thursday's close. The stock plummeted 73% week-to-Thursday's close over concerns that the firm was considering bankruptcy.
Shares of Roku(ROKU) slid about 20% after a research analyst distributed a note asking if the streaming-device maker was "broken." That follows a string of bad headlines for the company, and brings its two-week decline to over one-third of its September 6 record high.
How are other markets trading?
U.S. Treasury yields fell this week (link)with the benchmark 10 year yield down nearly 20 basis points. The 10-year U.S. note fell five basis points on Friday to 1.73%, while the 2-year fell six basis points to 1.68%.
In commodities, oil futures rose 6% for the week, the biggest weekly gain in three months after the attacks on Saudi oil fields last weekend (link), but West Texas Intermediate crude for October delivery on the New York Mercantile Exchange fell 0.07% on Friday, closing at $58.09 a barrel.
Gold rose 1.14% to close at $1,523.40 an ounce, posting a gain for the week (link), while the U.S. dollar, as measured by the ICE U.S. Dollar Index , a gauge of the buck against a basket of leading rivals, edged 0.2% higher, to $98.47.
(END) Dow Jones Newswires
September 20, 2019 16:33 ET (20:33 GMT)Copyright (c) 2019 Dow Jones & Company, Inc.