Week 37 in Brief
U.S. stock ended lower Friday and slumped for the week, after a reading on the consumer sentiment held to a roughly 10-year low and as investors dealt with the volatile quadruple witching period – a time when stock index futures, stock index options, stock options, and single stock futures expire simultaneously.
How did the major indices perform?
- The Dow Jones Industrial Average fell 166.44 points, or 0.5%, to close at 34,584.88.
- The S&P 500 slid 40.76 points, or 0.9%, to end at 4,432.99, with the index slipping below its 50-day moving average of about 4,436.
- The Nasdaq Composite declined 137.96 points, or 0.9%, finishing at 15,043.97.
- For the week, the Dow lost about 0.1% in its third straight weekly decline, booking its longest weekly losing streak since the four weeks ending Sept. 25, 2020, according to Dow Jones Market Data.
- The S&P 500 saw a weekly decline of 0.6% in a second straight week of losses, while the Nasdaq Composite fell 0.5%, also booking two consecutive weeks of declines, according to FactSet.
What drove the market?
- Discouraging Consumer sentiment data: Declines on Wall Street accelerated somewhat following the University of Michigan’s gauge of consumer sentiment, which rebounded slightly to a preliminary September reading of 71 from a final August reading of 70.3, above consensus estimates for 72. Still, the reading remains close to the roughly 10-year low seen in August, with consumers feeling worse about the economy today than at any point during the COVID-19 pandemic. Consumer sentiment is drawing more attention than it ordinarily would because of the significance of consumer behavior on the economic recovery from the pandemic. But the confidence is bottoming out as we move past peak delta in the U.S. Indeed, this week showed stronger-than-expected U.S. August retail sales, but a jump in weekly jobless benefit claims, all ahead of next week’s two-day Federal Open Market Committee policy meeting.
- Coronavirus concerns: The market remains concerned over the delta variant of the coronavirus and the toll it may be taking on growth. The bears were out in numbers on Friday, with downside momentum wiping out weekly gains for the three main indexes and sparking whipsawing action in the five-session trading stretch.
- This comes even as independent advisers to the U.S. Food and Drug Administration recommended that vaccinated adults aged 65 and older should get booster shots, but not for the general public. While companies such as Pfizer Inc. and Moderna Inc. say the boosters are needed, scientists have cited a lack of evidence to support that rollout.
- Quadruple witching: Market volatility Friday was also due to “quad witching,” the simultaneous expiration of individual stock options, stock-index options, stock-index futures, and single-stock futures.
Which stocks were in focus Friday?
- Shares of Invesco jumped about 5.5% after the Wall Street Journal reported the money manager is in talks to combine with State Street’s asset-management business. Invesco manages about $1.5 trillion. State Street shares were off 2.6%.
- Archer Aviation Inc.’s stock fell 4.4% on the NYSE on Friday, after the completion of the all-electric vertical takeoff and landing (eVTOL) aircraft maker’s merger with special-purpose acquisition company (SPAC) Atlas Crest Investment Corp.
- Shares of Lincoln Financial Group were in focus Friday, after the insurer announced an agreement with Resolution Life subsidiary Security Life of Denver Insurance Co., to reinsure about $9.4 billion of executive benefit and universal life reserves. Its stock was up 1.4%.
- Shares of Diamondback Energy Inc. drew attention in Friday trade after the oil-and-gas company announced a new $2 billion stock repurchase program. Its stock rose 3.2%.
- Shares of Take-Two Interactive Software Inc. were down 0.2% after BMO Capital Markets analyst Gerrick Johnson downgraded the stock to market perform from outperform.
- Shares of cybersecurity company IronNet Inc. tumbled 26.9% but were still up about 40% on the week.
How did the European markets perform?
- European stocks fell on Friday, capping their third straight week in the red as the basic resources sector was hit by declines in Anglo American, but news that Britain was mulling easing travel restrictions boosted airlines and hotel groups.
- The pan-European STOXX 600 index fell 0.9% on the day.
- The European mining index was hit by worries about slowing growth in China, falling nearly 8% for the week. Anglo American tumbled 8.1% after Morgan Stanley and UBS downgraded the stock. London’s miner-heavy FTSE 100 index shed 0.9%, while German stocks fell 1.0%.
- Meanwhile, after losing 3.4% on Thursday in one of the best single-day performances this year, the European travel and leisure index added 1.2%. The index closed 2.7% higher for the week, leading to gains across European sectors.
- Meanwhile, Germany’s Commerzbank climbed 1.2% after a Handelsblatt report said U.S. investor Cerberus was considering taking a 15.6% state in the bank after the federal election.
- Spanish pharmaceuticals company Grifols rose 5.8% after it proposed a 1.6 Billion Euro ($1.9 billion) takeover of its German rival Biotest, in a move to consolidate the plasma-based drug industry.
- Data showed British retail sales unexpectedly fell again in August in what is now a record streak of monthly declines.
- While European stock markets looked set to end the week on a steady footing, next week could be pivotal in determining near-term market direction, with the U.S. Federal Reserve and the Bank of England’s policy meetings, as well as German elections on deck.
How did Asian markets perform?
- Asian markets finished mixed as of the most recent closing prices. The Shanghai Composite rose 0.2%, but booked a 2.4% weekly drop, Hong Kong’s Hang Seng Index gained 1% but finished the week 4.9% lower and Japan’s Nikkei 225 index rose 0.6%, contributing to a 0.4% weekly gain.
- Still, while American and European stocks all closed lower after rising earlier on Friday, Asian markets headed into the weekend on an upbeat note.
- Most regional indexes were pressured this week on worries about slowing global growth and tighter regulation of Chinese firms.
Commodities and Bonds
- The yield on the 10-year Treasury note rose 3.8 basis points to 1.37%.
- Oil futures fell Friday, pulling back from seven-week highs as crude production in the Gulf of Mexico makes a slow comeback from Hurricane Ida, but the U.S. and global benchmark crude prices scored solid weekly gains for a fourth week in a row.
- US WTI crude for October delivery fell 64 cents, or 0.9%, to settle at $71.97 while November Brent crude declined by 33 cents, or 0.4%, at $75.34 a barrel.
- For the week, WTI futures saw a rise of 3.2%, while Brent was up 3.3% — both were up a fourth week in a row.
- Gold futures ended 0.3% lower to settle at $1,751.40 an ounce, down 2.3% for the week in a second straight weekly decline.
- The dollar scaled three-week peaks on Friday, supported by better-than-expected U.S. retail sales data. The dollar index, a gauge of the greenback’s value against six major currencies, rose to 93.220, the highest since the third week of August. It was last up 0.4% at 93.207.
- For the week, the dollar index gained 0.6%, its largest weekly percentage rise since mid-August.
- In afternoon New York trading, the euro slid 0.3% to $1.1729, after hitting a three-week low of $1.1724 earlier in the session.
- The British pound fell 0.4% to $1.3738 as UK retail sales undershot expectations. However, with investors bringing forward forecasts for a Bank of England interest rate hike to mid-2022, sterling remains supported.
Investors will closely watch the reports from the Federal Reserve Open Markets Committee (FOMC) meeting on interest rates and monetary policy decisions, and parse economic data from across the world.