Tech drags U.S. stocks amid big options test: wrap markets

(Bloomberg) — The stock market fell as technology came under pressure and a pile of options expiring Friday threatened to trigger unexpected price swings.

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Traders also went through mixed economic data. U.S. utilities activity rose slightly earlier this month at the fastest pace in more than two years, while the outlook was boosted by cooler price pressures and the prospect of lower borrowing costs. US existing home sales fell for a third straight month in May, while prices hit another record.

Wall Street is facing a quarterly episode known as the “triple witch” in which derivatives contracts linked to stocks, index options and futures are scheduled to mature – forcing traders en masse to move positions of their existing ones or start new ones. About $5.5 trillion will expire on Friday, according to an estimate by options platform SpotGamma.

The S&P 500 edged lower, with Nvidia Corp. major losses in megacaps. The 10-year Treasury yield was little changed at 4.25%.

At a time when the US stock market is breaking old records and setting new ones seemingly on a daily basis, bearish investors cannot be blamed for their departure. However, their growing shortage is leaving stocks increasingly exposed to a sudden change in sentiment.

Short interest in the two largest exchange-traded funds — the SPDR S&P 500 ETF Trust (ticker SPY ) and the Invesco QQQ Trust Series 1 ( QQQ ) — have sunk to record lows this year, providing a steady stream of support. for stocks and helping to suppress volatility, JPMorgan strategists led by Nikolaos Panigirtzoglou wrote this week.

At the same time, the strong lack of investors willing to bet on a decline in stocks “signals an increased vulnerability to negative news,” strategists said.

Friday’s “triple magic” comes as implied volatility in S&P 500 options is holding near its lowest level since before the coronavirus pandemic, with the benchmark U.S. index outpacing gains in Nvidia Corp. shares. and other companies related to artificial intelligence. Expiry coincides with index rebalancing, when the S&P Dow Jones Indices switch company weightings and ETFs that track its gauges make similar adjustments.

The continued power of artificial intelligence that briefly made Nvidia Corp. The world’s most valuable company this week also made record inflows into technology funds, Bank of America Corp. said. strategists About $8.7 billion flowed into tech funds in the week to June 19, according to a note from the bank citing data from EPFR Global.

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“The ‘all roads lead to Nvidia’ trade has strengthened once again” as Europe wobbles amid political turmoil in France, strategist Michael Hartnett said.

Corporate Highlights:

• Airbus SE is nearing a deal with Spirit AeroSystems Holdings Inc. to take over part of the aerospace supplier’s business, paving the way for a majority buyout of the company by arch-rival Boeing Co. as early as next week.

• Sarepta Therapeutics Inc.’s gene therapy. won expanded US approval to include more children with a deadly muscle disease, expanding the market for a controversial treatment that has yet to prove its benefit in clinical trials.

• Standard Chartered Plc is setting up a trading desk for Bitcoin and Ether, people familiar with the matter said, making it one of the first global banks to enter cryptocurrency trading.

• Carlsberg AS said it is weighing its options after Britvic Plc rejected unsolicited takeover offers that valued the U.K. soft drinks maker at up to 3.1 billion pounds ($3.9 billion).

• Prime Minister Justin Trudeau’s government is preparing potential new tariffs on electric vehicles made in China to bring Canada into line with actions taken by the U.S. and the European Union, according to people familiar with the matter.

Some of the main movements in the markets:

INVENTORY

• The S&P 500 was down 0.2% at 10:03 a.m. New York time

• Nasdaq 100 fell 0.3%

• The Dow Jones Industrial Average rose 0.1%

• Stoxx Europe 600 fell 0.8%

• MSCI World Index fell by 0.4%

currencies

• The Bloomberg Dollar Spot Index is little changed

• The euro fell 0.2% to $1.0684

• The British pound fell 0.2% to $1.2634

• The Japanese yen fell 0.2% to 159.18 per dollar

Cryptocurrencies

• Bitcoin fell 2.4% to $63,512.13

• Ether fell 1.6% to $3,466.38

BONDS

• The 10-year Treasury yield was little changed at 4.25%

• Germany’s 10-year yield fell four basis points to 2.39%

• Britain’s 10-year yield advanced two basis points to 4.07%

wares

• West Texas Intermediate crude was little changed

• Spot gold fell 1% to $2,335.57 an ounce

This story was produced with the help of Bloomberg Automation.

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