By Caitlin Ostroff
U.S. stock futures wavered Friday ahead of the simultaneous expiration of an array of stock futures and options contracts that could result in increased volatility.
Futures tied to the S&P 500 wavered between losses and gains. The benchmark may still be on track to eke out a tepid gain for the week, despite two consecutive days of declines. Contracts tied to the tech-heavy Nasdaq Composite ticked up 0.4%.
The occurrence of so-called quadruple witching -- when both futures and options linked to individual stocks and to stock indexes expire on the same day -- means investors are braced for a choppy session. A surge in options trading targeted at giant tech stocks by both small and large investors have also been magnifying the market's ups and downs in recent days.
"It is normally a day where you're glued to your screen and you're watching for volatility," said Altaf Kassam, head of investment strategy for State Street Global Advisors in Europe. "We've had an abnormal amount of options on single stocks, so you might see some movement in single stocks."
Big swings in some of the major technology stocks on Friday could also lead to volatility in the benchmark indexes, which are dominated by the so-called FAANG stocks, made up of Facebook, Apple, Amazon.com, Netflix and Google parent Alphabet, he said.
The Cboe Volatility Index, a measure of expected turbulence in U.S. stocks, is on course for its third consecutive daily gain and longest rising streak since Aug. 20.
"If you think about it, we've had all the easy gains," said Mr. Kassam. "It's going to get incrementally harder for us to keep pushing up that hill."
Investors will also be watching for fresh data gauging how Americans view the economy when the University of Michigan publishes preliminary figures for its September survey at 10 a.m. ET.
Also on Friday, lawmakers are aiming to unveil a bipartisan spending bill averting a government shutdown next month. But Democrats and Republicans remain at an impasse over another round of coronavirus relief despite President Trump's renewed interest in a deal.
The breakdown in negotiations has disappointed some investors who expected another relief package would lend more spending power to Americans and boost economic recovery. Additional support could bolster consumer spending, which powers two-thirds of the U.S. economy.
Markets have taken a damper this week after the Federal Reserve said the U.S. economic outlook remains highly uncertain. Some investors were disappointed that the central bank didn't offer more guidance around additional stimulus measures or specifics about its inflation targets.
But speculation that the Fed would keep interest rates near zero for some years, resulting in low bond yields, has been encouraging many people to move funds into riskier assets for some month. That has led to a rally in stocks.
"This is a once-in-a-generation ability to make money," said Patrick Spencer, managing director at U.S. investment firm Baird. "That announcement from the Fed was very powerful, and it's going to try and inflate inflation and that's good for stocks."
The yield on the 10-year Treasury ticked higher to 0.684%, from 0.682% Thursday. Yields rise when prices fall.
Overseas, the pan-continental Stoxx Europe 600 was also largely flat. Among individual equities, shares in Euronext NV rose 4.1% after the London Stock Exchange Group said Friday that it has entered into exclusive talks with the exchange operator over the sale of Italy's Borsa Italiana.
In Asia, China's Shanghai Composite Index led regional gains, with a more than 2% rise by the close of trading, helped by rallies in financial stocks. State-owned China Life Insurance Co. and New China Life Insurance Co. both surged by 10%, the maximum daily gain allowed, as did broker Zheshang Securities.
Foreign investors have added to their holdings of Chinese stocks, helping bolster the yuan, which in recent days has hit its strongest levels against the dollar since May 2019. The Chinese currency strengthened slightly on Friday to 6.7565 a dollar.
Elsewhere, major indexes in Hong Kong, Japan and South Korea advanced less than 0.5%, while the Australian benchmark fell slightly.
--Joanne Chiu in Hong Kong contributed to this article.
Write to Caitlin Ostroff at firstname.lastname@example.org