Dow drops nearly 200 points as US stocks fall in volatile trade

What drives the markets?

U.S. stocks opened higher early on Friday, but then fell as oil prices extended their declines and the “quadruple witch” – the simultaneous expirations of stock index futures, stock index options, stock options and single stock futures – have contributed to trading volatility. Joe Saluzzi, co-head of equity trading at Themis Trading, told MarketWatch on Friday that the combination of these two factors is weighing on stocks.

He speculated that there could be more losses ahead as the CBOE Volatility Index, commonly referred to as the VIX, sat at 33, still below a reading of 40 that would indicate genuine investor capitulation. . The S&P 500 energy sector was the worst performer on Friday, down more than 4%, while the US oil benchmark WBS.1,
-5.24%
fell more than 5% to trade at around $109 a barrel.

“It was a bad week, it was a really bad week,” Saluzzi said. “The Federal Reserve certainly didn’t trust us this week…we’re kind of stuck right now.”

The losses come as U.S. markets close on Monday for the June 19 public holiday.

As Saluzzi mentioned, investors are still trying to rein in Wednesday’s Fed interest rate hike, the largest since 1994. Markets face bruising weekly losses, S&P 500 down 6% this week from Thursday and heading for its biggest weekly decline since March 20, 2020, according to Dow Jones Market Data.

A mixed bag of data this week raised concerns about a slowing U.S. economy, Saxo Bank strategists noted in a note on Friday. Stock traders can’t decide whether to ‘celebrate weak data as something that will eventually drive US yields lower and see the Fed’s tightening pace eventually reverse or worry about weak data because of the implications for corporate earnings,” they added. On Friday, investors received May’s reading on U.S. industrial production, which came in below expectations but remained in positive territory, pointing to a fifth month of growth.

Saxo said the next data points to watch will be the preliminary services and manufacturing PMI surveys for June, due next week.

The yield of the 10-year Treasury note TMUBMUSD10Y,
3.228%
continued to fall early on Friday, falling another 5 basis points to 3.26%, after the biggest two-day drop in three months on Thursday for him and the 2-year yield TMUBMUSD02Y,
3.179%.
The latter is up 2 basis points to 3.18%. The Treasury yield curve remained inverted, with 5- and 7-year Treasury yields higher than the 30-year long bond yield.

On Friday, investors heard from Chairman Jerome Powell, who delivered a keynote address at the inaugural conference on the International Roles of the U.S. Dollar at 8:45 a.m. EST. Powell said that “the Fed is ‘very focused on getting inflation back to our 2% target’, but since his remarks focused primarily on the role of the dollar as the world’s reserve currency, his comments did not offered no new perspective on the outlook for monetary policy.

And to cap off a busy week for central banks, the Bank of Japan bucked the trend of central bank monetary tightening this week and left its key interest rates unchanged, causing the yen to fall sharply USDJPY,
+2.18%
which was down almost 2% at 134.80 against the dollar. BOJ Governor Haruhiko Kuroda voiced concerns about the yen’s rapid weakening at a press conference after the meeting.

Lily: Here’s what’s at stake for markets as the Bank of Japan sticks to its dovish course

The Swiss National Bank and the Bank of England both raised their benchmark interest rates this week, while the European Central Bank announced a new mechanism to prevent bond yields from the most indebted countries in the euro zone. to increase too quickly.

Lily: ‘The opposite of policy coordination’: Swiss National Bank and Bank of England raise interest rates after Fed hikes

Which companies are targeted?

• Adobe Inc.
  ADBE,
  -1.77%
  shares fell more than 3% after an adjustment to earnings forecasts.

• Shares of Mereo BioPharma Group
  MREO,
  +63.50%
  climbed 60% to trade north of 50 cents after The Times reported, without attribution, that AstraZeneca PLC
  AZN,
  +0.09%

  AZN,
  +1.68%
  is considering a bid for the London-based, US-listed biotech.

• A handful of oil and gas companies, including Diamondback Energy
  CROC,
  -8.35%
  and Devon Energy
  NDV,
  -8.25%
  were among the biggest declines due to the evolution of oil prices.

• U.S.-listed shares of China-based companies posted big and wide gains on Friday, after Reuters reported that China’s central bank had accepted Ant Group’s request to set up a financial holding company. Ali Baba
  BABA,
  +0.58%
  shares rose more than 7% on the news.

• Revlon REV shares,
  +75.19%
  jumped more than 60% following reports that Indian conglomerate Reliance Industries was considering buying the struggling cosmetics company.

How are other assets trading?

• The ICE US Dollar Index DXY,
  +1.17%,
  a measure of the currency against a basket of six major rivals, rose 1%.

• BitcoinBTC USD,
  -0.61%
  was lower at $20,888.

• Oil futures were higher, with US benchmark CL.1,
  -5.14%
  up 2% to $117.6 a barrel. GC00 gold futures,
  -0.18%
  were down slightly to $1,847 an ounce.

• The Stoxx Europe 600SXXP,
  +0.08%
  increased by 0.7%.

• The Shanghai Composite SHCOMP,
  +0.96%
  rose 0.9%, while the Hang Seng HSI index,
  +1.10%
  rose 1.% and Japan’s Nikkei 225 NIK,
  -1.77%
  fell 1.7%.