Wall Street closed lower on Friday to end a disappointing week. The typical September syndrome, which is historically the worst-performing month on Wall Street, is already visible this year. Low-level of consumer sentiment and quadruple witching dented investors’ confidence. All three major stock indexes ended in red. For the week as a whole, these indexes finished in negative territory too.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 0.5% or 166.44 points to close at 34,584.88. Notably, 6 components of the 30-stock index ended in the green while 213 in red and 1 was unchanged. Moreover, the tech-heavy Nasdaq Composite finished at 15,043.97, sliding 0.9% or 137.96 points due to weak performance by large-cap technology stocks.
Meanwhile, the S&P 500 moved down 0.9% to end at 4,432.99. The Materials Select Sector SPDR (XLB), the Technology Select Sector SPDR (XLK), the Utilities Select Sector SPDR (XLU) and the Communications Services Select Sector SPDR (XLC) dropped 2.1%, 1.6%, 1.5% and 1.1%, respectively. Ten out of eleven sectors of the benchmark index closed in negative territory while one in green.
The fear-gauge CBOE Volatility Index (VIX) was up 18.3% to 20.81. A total of 15.51 billion shares were traded on Friday, higher than the last 20-session average of 9.7 billion. Decliners outnumbered advancers on the NYSE by a 1.97-to-1 ratio. On Nasdaq, a 1.00-to-1 ratio favored advancing issues.
Quadruple Witching Heightens Volatility
Volatility on U.S. stock markets jumped on Friday predominantly due to a market phenomenon called “quadruple witching”. This means, simultaneous expiration of individual stock options, stock-index options, stock-index futures and single-stock futures.
This happens once every quarter and is historically associated with increased volatility and high trading volume. Quadruple witching generally results in choppy trading session. The spread of the Delta variant of coronavirus further heightened market’s volatility.
Shares of technology behemoths like Facebook inc. FB, Alphabet Inc. GOOGL, Apple Inc. AAPL and Microsoft Corp. MSFT fell 2.2%, 2%, 1.8% and 1.7%, respectively. Apple sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The University of Michigan reported in its preliminary study that U.S. consumer sentiment increased to 71 in September from 70.3 in August. However, the consensus estimate was 72.3. Despite a rise in consumer sentiment, the metric remained near to its 10-year low reading posted last month.
The sub-index for current condition dropped to 77.1 in September from 78.5 in August. The sub-index for expectations for the next six month rose to 67.1 in September from 65.1 in August. The index for household inflation expectations for the next 5 years remained flat month over month at 2.9% in September. This index was around 2.3% in the pre-pandemic period. Expectations for 1 year inflation grew 1 basis point to 4.7% in September compared with August.
Last week was a disappointing one on Wall Street. The Dow was down 0.1%, marking its third straight weekly decline. This was the blue-chip indexes longest weekly losing streak since the four weeks of loss ended Sep. 25, 2020. The market’s benchmark S&P 500 Index was down 0.6%, reflecting its second straight weekly drop. The Nasdaq Composite fell 0.5%, registering its second successive weekly loss.
The rapid spread of the Delta variant, highly disappointing job additions in August and elevated inflation data dented market participants’ confidence of robust economic recovery going forward. High valuation of U.S. stocks buoyed by an impressive rally in the first eight months of this year also compelled a section of investors to think about a market correction.
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