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U.S. Stocks Waver as Investors Brace for Volatile Trading

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09/18/2020 | 11:45am EDT

By Caitlin Ostroff

U.S. stocks wavered Friday but remained on track to finish another tumultuous week with slim gains.

The S&P 500 slipped 0.3% shortly after the opening bell. The tech-heavy Nasdaq Composite was little changed. The Dow Jones Industrial Average lost about 120 points, or 0.4%.

The occurrence of so-called quadruple witching -- when both futures and options linked to individual stocks and stock indexes expire on the same day -- means investors are braced for a choppy session. A surge in options trading targeted at giant technology stocks by both small and large investors has 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."

In corporate news, shares of Oracle lost 0.7% after the Trump administration said it would block downloads of TikTok and the U.S. use of Chinese messaging and payment app WeChat. Under the latest plan for a majority U.S. ownership of Chinese-owned video-sharing app TikTok, Oracle and Walmart could together own a significant stake, The Wall Street Journal reported.

Analysts said investors are watching for progress in Covid-19 vaccine trials and monitoring economic data to assess how much stocks can climb, following a rebound from March lows.

"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."

Also on Friday, lawmakers are aiming to unveil a bipartisan spending bill averting a government shutdown next month. 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.

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. 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."

Overseas, the pan-continental Stoxx Europe 600 fell 0.5%.

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 and New China Life Insurance 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.

Elsewhere, major indexes in Hong Kong, Japan and South Korea advanced less than 0.5%, while the Australian benchmark fell slightly.

--Joanne Chiu and Gunjan Banerji contributed to this article.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com

 


Stocks mentioned in the article
ChangeLast1st jan.
DJ INDUSTRIAL -0.10% 28335.57 Delayed Quote.-0.71%
NASDAQ 100 0.25% 11692.571891 Delayed Quote.33.89%
NASDAQ COMP. 0.37% 11548.281629 Delayed Quote.28.71%
S&P 500 0.34% 3465.39 Delayed Quote.7.26%
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