Stocks Moderately Lower Ahead of the Quarterly Triple-Witching Event

The S&P 500 Index ($SPX) (SPY) today is down by -0.13%, the Dow Jones Industrials Index ($DOWI) (DIA) is down by -0.17%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down by -0.19%.

Stocks today are moderately lower, giving back some of Thursday’s sharp gains.  Stocks are under pressure today from some negative corporate news.  FedEx is down more than -14% after reporting Q1 adjusted EPS well below the consensus and cutting its 2025 adjusted EPS forecast.  Also, Lennar is down more than -4% after reporting Q3 net new orders below consensus.

Market volatility today may be higher than usual due to the quarterly episode known as “triple witching,” when derivatives contracts tied to stocks, index options, and futures expire, potentially amplifying market moves.  According to analytical firm Asym 500, about $5.1 trillion of contracts are set to expire today.  The expiry today also coincides with the rebalancing of benchmark indexes.  The event has a reputation for causing sudden price moves as contracts disappear and traders roll over their existing positions or start new ones. 

The markets are discounting the chances at 100% for a -25 bp rate cut at the November 6-7 FOMC meeting and at 41% for a -50 bp rate cut at that meeting.

Overseas stock markets today are mixed.  The Euro Stoxx 50 is down -0.65%.  China's Shanghai Composite closed up +0.03%.   Japan's Nikkei Stock 225 rose to a 2-week high and closed up +1.53%.

Interest Rates

December 10-year T-notes (ZNZ24) today are down -2 ticks.  The 10-year T-note yield is up +3.2 bp to 3.745%.  Dec T-notes today are slightly lower.  Supply pressures are weighing on T-notes as the Treasury will auction $183 billion of T-notes next week, beginning with Tuesday’s $60 billion auction of 2-year T-notes.  Losses in T-notes are limited as weakness in stocks has boosted some safe-haven demand for T-notes. 

European government bond yields today are mixed.  The 10-year German bund yield is up +0.2 bp at 2.220%. The 10-year UK gilt yield is down -0.7 bp at 3.884%.

German Aug PPI rose +0.2% m/m and fell -0.8% y/y, stronger than expectations of unchanged m/m and -1.0% y/y.

ECB Governing Council member Rehn said the ECB has "a clearly easing direction for its monetary policy, with the pace and scope dependent on fresh economic data and analysis."

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 24% for the October 17 meeting.

US Stock Movers

FedEx (FDX) is down more than -14% to lead losers in the S&P 500 after reporting Q1 adjusted EPS of $3.60, well below the consensus of $4.77, and cutting its 2025 adjusted EPS forecast to $20.00-$21.00 from a previous forecast of $20.00-$22.00, the midpoint weaker than the consensus of $20.53.  United Parcel Service (UPS) is also down more than -3% on the news.

Semiconductor stocks are under pressure today to weigh on the overall market.  ON Semiconductor (ON) is down more than -3%, and GlobalFoundries (GFS), Microchip Technology (MCHP), and NXP Semiconductors (NXPI) are down more than -2%.  In addition, Analog Devices (ADI), Lam Research (LRCX), Texas Instruments (TXN), Applied Materials (AMAT), and KLA Corp (KLAC) are down more than -1%. 

Apellis Pharmaceuticals (APLS) is down more than -9% after the European Medicines Agency upheld its negative opinion on the marketing authorization for the company’s Syfovre eye drug. 

Frontline Plc (FRO) is down more than -6% after SEB Equities double-downgraded the stock to sell from buy with a price target of $19.05. 

Lennar (LEN) is down more than -4% after reporting Q3 net new orders of 20,587, below the consensus of 20,827. 

PBF Energy (PBF) is down more than -4% after Piper Sandler downgraded the stock to underweight from neutral with a price target of $25. 

Valero Energy (VLO) is down more than -3% after Piper Sandler downgraded the stock to neutral from overweight. 

PepsiCo (PEP) is down more than -1% after Morgan Stanley downgraded the stock to equal weight from overweight. 

Nike (NKE) is up more than +7% to lead gainers in the Dow Jones Industrials after announcing that Elliot Hill will return to the company as CEO and president effective October 14, a move analysts said was positive as Hill is an industry and company veteran. 

GE Vernova (GEV) is up more than +2% after Jeffries raised its price target on the stock to $293 from $261.

Assembly Biosciences (ASMB) is up more than +4% after Jeffries upgraded the stock to buy from hold with a price target of $35.

Exelon (EXC) is up more than +1% after Jeffries initiated coverage on the stock with a buy recommendation and a price target of $46. 

DoorDash (DASH) is up more than +1% after William O’Neil & Co. initiated coverage on the stock with a buy recommendation. 

Campbell Soup (CPB) is up more than +1% after Argus Research upgraded the stock to buy from hold with a price target of $59. 

Earnings Reports (9/20/2024)

Golden Matrix Group Inc (GMGI).

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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.