12/17 Friday is witching day for stocks
Administrator - Thursday, 17 December 2015 06:50
Friday is witching day for stocks
After suffering a serious post-Fed bashing, stocks could trade with both high volatility and high volume on the final quadruple witching Friday of the year.
The market sold off sharply into the close Thursday, with the Dow ending down 253 at 17,495 and the S&P 500 off 31 points or 1.5 percent to 2041. The twin culprits of falling oil prices and a stronger dollar reversed the previous day’s rally, along with concerns that the Fed may be too optimistic about raising rates.
Bond yields fell with the 10-year at about 2.22 percent, and the 2-year at 0.98 percent. Yields move inversely to price. West Texas Intermediate oil futures settled down 1.6 percent to $34.95 per barrel, just above the low of $34.53 per barrel reached on Monday. While that move seems tiny, oil prices rose nearly 10 percent off the Monday low before falling back down again.
“We’ve got a quadruple witch tomorrow. People are nervous today in advance of triple witching Friday,” said Leo Grohowski, chief investment officer with BNY Mellon Wealth Management. Quadruple “witching” expiration is the quarterly expiration of stock and index options and stock and index futures.
Thursday’s sell-off was “a little bit of a hangover” after Wednesday’s late-day rally in the wake of the Fed rate hike announcement, Grohowski said. http://www.cnbc.com/2015/12/17/friday-is-witching-day-for-stocks.html
This could be what drives stocks next year
Worries that the Fed will keep hiking rates with a too weak economy is a recurring theme for the stock market.
Fed Chair Janet Yellen re-emphasized that economic data remain the most important signpost for the path of future hiking, after the central bank raised rates Wednesday.
For that reason, the ISM manufacturing survey and other reports in early January could play an outsized role for markets.
According to UBS strategists, the ISM manufacturing survey, on the first trading day of the new year, could be a factor that helps determine the course of markets for the month of January.
For that matter, it could also influence performance for the year, if you believe the Wall Street adage — so goes January, so goes the year.
“Between the employment report in the first week of January and the ISM report, basically the first (trading days) of January are really going to set the tone for the entire month of January, and quite honestly looking to market history, it could very well set the whole tone for the year,” said Julian Emanuel, equities and derivative strategist at UBS.
The Dow was down triple digits Thursday as oil prices sank and the dollar strengthened. Jobless claims data were strong. The Philadelphia Fed’s gauge of manufacturing activity in the mid-Atlantic region fell to negative 5.9 from 1.9 in November.
“There’s a clear dividing line between bulls and bears now. If you’re bullish, you think the Fed is raising rates because the economy is good. It’s very gradual and everything’s going to be fine next year. That was yesterday’s rally,” said Peter Boockvar, chief market analyst at Lindsey Group.
“Then you get today, when you see the Philly Fed number, and you think ‘Geez, she’s embarking on this rate hike cycle in the seventh year of an economic expansion that’s showing signs of strain. She’s hiking interest rates, when global growth is soft and manufacturing is in recession. She’s raising interest rates and she wants to do it four times this year.'”
The December ISM survey will be especially important after it was surprisingly weak in November, falling to 48.6 percent, under 50 for the first time in three years. A reading under 50 signals contraction, and to many on Wall Street it reinforced what they were already seeing in other data — a manufacturing recession.
Boockvar said the bullish argument is that manufacturing is just a small part of the economy. “It’s all these numbers. There’s a lot of service businesses that do business with manufacturers, and the ISM services hasn’t been that great either. She picked a fine time to raise rates.” http://www.cnbc.com/2015/12/17/this-could-be-what-drives-stocks-next-year.html