(Bloomberg) — The massive expiration of Wall Street options not only left stocks struggling for a clear direction, but also sent one of the bull market's leaders into a volatile ride.
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About $5.5 trillion is expected to expire on Friday during a quarterly episode known as “triple witching” as derivatives contracts tied to stocks, index options and futures mature — forcing traders en masse to roll over existing positions or initiate new ones. This time Nvidia Corp is playing an additional role. The value of contracts tied to the chipmaker that expire on Friday is the second-largest of any underlying asset, trailing only the benchmark.
As contracts disappear, investors will adjust their positions, adding a wave of volume capable of swinging individual holdings. Trading volume in the S&P 500 was 60% higher than last month's average. Nvidia nearly erased a roughly 5% drop before plunging back down.
The options event comes at a critical juncture for market positions for the second half of 2024 and the Fed's next steps. The data showed that services activity in the United States rebounded early this month at the fastest pace in more than two years. Separately, existing home sales fell for the third month in a row.
“Investors should brace for drama,” said Solita Marcelli of UBS Global Wealth Management. “The second half of 2024 looks set to be a period of transition and volatility. The decisions investors make now will be key to getting through this period effectively.
The S&P 500 is hovering near 5470. Nvidia lost about $200 billion in two days. 10-year Treasury yields were little changed at 4.26%.
The ongoing artificial intelligence craze that briefly made Nvidia the world's most valuable company this week also led to record inflows into technology funds, Bank of America strategists said. About $8.7 billion flowed into technology funds in the week ending June 19, according to a note from the bank citing EPFR Global data.
“All roads lead to Nvidia's trade is strengthening again” as Europe falters amid political turmoil in France, said strategist Michael Hartnett. However, while investors still feel they need more exposure to AI-related plays, “all asset allocators are concerned about equity concentration risk,” Hartnett said.
The company's most prominent features:
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Apple is withholding a raft of new technologies from hundreds of millions of consumers in the European Union, citing concerns raised by the bloc's regulatory attempts to rein in big tech companies.
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Airbus SE is close to reaching an agreement with Spirit AeroSystems Holdings Inc. to acquire parts of the aerospace supplier's business, paving the way for Boeing Co. to take over a majority stake in the company as early as next week.
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American Airlines Group Inc. has decided to suspend new pilot training until the end of this year, the latest reversal by a major U.S. airline in the face of uneven travel demand and plane delays.
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A top US Food and Drug Administration official bypassed reviewers to give broad approval to Sarepta Therapeutics Inc's gene therapy. For a rare muscle disease in children, although there is no data showing that it actually slows the overall progression of the disease.
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Carlsberg AS said it was considering its options after Britvic Plc rejected unsolicited takeover offers that valued the UK soft drinks maker at up to 3.1 billion pounds ($3.9 billion).
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Prime Minister Justin Trudeau's government is preparing to impose potential new tariffs on Chinese-made electric vehicles to align Canada with measures taken by the United States and the European Union, according to people familiar with the matter.
Some key movements in the markets:
Stores
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The S&P 500 was little changed as of 1:06 PM New York time
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The Nasdaq 100 was little changed
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There was little change in the Dow Jones Industrial Average
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MSCI World Index fell 0.3%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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There was little change in the euro at $1.0692
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The British pound fell 0.1 percent to $1.2639
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The Japanese yen fell 0.4 percent to 159.49 yen to the dollar
Digital currencies
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Bitcoin fell 2.1% to $63,710.41
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Ethereum fell 0.9% to $3,490.71
Bonds
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The yield on 10-year Treasury bonds was little changed at 4.26%.
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The yield on 10-year German bonds fell two basis points to 2.41%.
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The UK 10-year bond yield rose three basis points to 4.08%.
Goods
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West Texas Intermediate crude fell 0.9% to $80.53 a barrel
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Gold in spot transactions fell 1.6 percent to $2,322.60 per ounce
This story was produced with assistance from Bloomberg Automation.
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