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Stock Market Falls Amid Big Tech Sell-Off and Options Expiry Threats

(Bloomberg) — The stock market fell as big tech sold off and a pile of options expiring Friday threatened to trigger sudden price swings.

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Wall Street is facing a quarterly episode ominously known as triple witching in which derivatives contracts tied to stocks, index options and futures are scheduled to mature ÔÇö compelling traders en masse to roll over their existing positions or to start new ones. About $5.3 trillion are set to expire, according to Rocky Fishman, founder of derivatives analytical firm Asym 500.

ÔÇ£ItÔÇÖs a day in which the direction of the market is very, very difficult to predict,ÔÇØ said Matt Maley at Miller Tabak. ÔÇ£The ÔÇÿinternalsÔÇÖ get so skewed by the expiration that they donÔÇÖt tell us anything. It will be important that investors donÔÇÖt use todayÔÇÖs action when trying to decipher what is going to happen in the marketplace next week and beyond.ÔÇØ

The options episode comes at a critical juncture for markets positioning for next weekÔÇÖs Federal Reserve policy meeting. A recent pickup in inflation isnÔÇÖt likely to shift officialsÔÇÖ forecasts for three interest-rate cuts this year and four in 2025, according to economists surveyed by Bloomberg News.

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Market Analysis and Trends

The S&P 500 dropped to around 5,110, with trading volume that was 25% above the average of the past month. The Nasdaq 100 fell about 1%. Adobe Inc. sank on a weak sales outlook. Nvidia Corp. headed toward a 10th straight weekly gain, with its artificial intelligence conference just days away. Treasury 10-year bonds were set for their worst week this year.

Traders in interest-rate swaps pushed bets on the timing of the full first, quarter-point rate cut from the Fed to the central bankÔÇÖs July meeting. Yields rose on the day on most maturities, leaving both two- and 10-year rates more than 20 basis points higher on the week.

Macro Economic Indicators

The selloff caps a week in which reports showed inflation remains stubbornly sticky, intensifying the debate around the degree of easing officials will signal after their policy meeting next week.

ÔÇ£This week has been remarkably confusing on multiple fronts,ÔÇØ said Florian Ielpo at Lombard Odier Asset Management. ÔÇ£The macroeconomic news flow has made it clear that the US economy is unexpectedly slowing down, while inflation is decelerating at a slower pace. Instead of focusing on the economic slowdown, markets have fully embraced the inflation narrative.ÔÇØ

Fed officials last released quarterly forecasts in December, anticipating three quarter-point cuts in 2024, and theyÔÇÖre set to release an update of those projections ÔÇö known as the dot plot ÔÇö on March 20.

Market Predictions and Investor Sentiments

The rally in equity markets could falter if sticky inflation prompts the Fed to turn more hawkish next week and signal fewer-than-expected rate cuts, according to Barclays Plc strategists led by Emmanuel Cau.

ÔÇ£With the Fed so far endorsing current market pricing of three cuts starting in June, investors continue to see the glass half full on the soft landing narrative,ÔÇØ they wrote.

Investors are dismissing the risk of stagflation, sending record flows into US equities, according to Bank of America Corp.

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Corporate Highlights

• Nippon Steel Corp. said itÔÇÖs determined to complete its $14.1 billion acquisition of United States Steel Corp., even after President Joe Biden stated the company should stay in US hands.

• JD.com Inc. said it will not make an offer for British electronics retailer Currys Plc, just days after US buyout firm Elliott Investment Management also walked away.

• Binance Holdings Ltd. has tightened requirements for listing new digital tokens, stepping up efforts to bolster investor protections on its platform.

• Boeing Co. has sent a so-called multi-operator message to operators of the 787 jetliner following an in-flight incident involving the long-distance jet a few days ago, in which the plane briefly and rapidly lost altitude, injuring multiple people on board.

• United Airlines Holdings Inc. is close to securing three dozen or more Airbus A321neo jets from aircraft lessors as it looks to replace Boeing Co. 737 Max 10 orders that are at least five years behind schedule, according to people familiar with the matter.

• Madrigal Pharmaceuticals Inc.ÔÇÖs drug Rezdiffra gained the first US approval to treat a potentially deadly liver disease that affects millions worldwide, succeeding in an area where some bigger rivals have failed.

• Reckitt Benckiser Group Plc plunged after a jury awarded an Illinois woman $60 million in damages, saying the companyÔÇÖs Enfamil baby formula led to the death of her premature baby.

Some of the main moves in markets:

Market Movements

Stocks

• The S&P 500 fell 0.7% as of 12:25 p.m. New York time

• The Nasdaq 100 fell 1.2%

• The Dow Jones Industrial Average fell 0.5%

• The Stoxx Europe 600 fell 0.2%

• The MSCI World index fell 0.6%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%

• The euro was little changed at $1.0889

• The British pound fell 0.1% to $1.2736

• The Japanese yen fell 0.5% to 149.03 per dollar

Cryptocurrencies

• Bitcoin fell 4% to $67,866.54

• Ether fell 4.3% to $3,676.15

Bonds

• The yield on 10-year Treasuries was little changed at 4.29%

• GermanyÔÇÖs 10-year yield advanced one basis point to 2.44%

• BritainÔÇÖs 10-year yield was little changed at 4.09%

Commodities

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Lu Wang, Carter Johnson and Farah Elbahrawy.

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