Stocks Rebound Before Friday’s Options Expiration: Markets Wrap

(Bloomberg) — Stocks rose in a volatile session ahead of Friday’s options expiration, which is forecast to be the second-biggest in recent history.

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Technology shares drove a rebound in equities as giant chipmaker Nvidia Corp. boosted its outlook. Macy’s Inc. and Kohl’s Corp. paced gains in retailers after signaling consumer demand remains robust going into the holidays. The Dow Jones Industrial Average underperformed as Cisco Systems Inc., the biggest maker of computer networking equipment, gave a lackluster projection. Equities fell earlier Thursday after a tweet from CNN raised concerns that Democratic Senator Joe Manchin’s vote on President Joe Biden’s economic package known as Build Back Better may not be a lock.

“Equities are likely to remain under pressure throughout the week into Friday’s options expiry, in line with what we’ve seen during most expiry weeks this year,” Russ Visch, BMO Capital Markets’ technical analyst, said in a note. “Following that, we expect the bias for equities should remain to the upside.”

The next six months could see the S&P 500 hitting 5,200 in an environment of reduced monetary stimulus and outperformance by cyclical companies, according to UBS Global Wealth Management. That would imply an 11% rally from Wednesday’s close. 2022 is expected to be a year of two halves — the first marked by high rates of economic growth and inflation and the second by lower growth and reduced price pressures, said Mark Haefele, chief investment officer at the bank.

JPMorgan Chase & Co. economists said they now expect the Federal Reserve to raise interest rates next September, becoming the latest on Wall Street to jettison a forecast for the central bank to stay on hold through 2022. Goldman Sachs Group Inc. analysts said last month they expect a Fed hike in July. Their counterparts at Morgan Stanley still see officials not shifting rates throughout next year.

Traders have pushed back bets on the first European Central Bank rate hike to 2023, a sign they’re heeding policy makers’ message of patience. Money markets now expect the central bank to raise its deposit rate by 10 basis points only in February 2023, compared with wagers December 2022 on Wednesday. Then, the policy rate could take five years to rise to 0%, swaps contracts suggest.

The Swiss franc hit its strongest level against the euro in more than six years as a renewed surge of Covid-19 infections in Europe buoyed demand for haven assets. The Turkish lira fell to a record low after the central bank cut borrowing costs for a third straight month. An interest-rate increase by South African officials provided little support for the rand, which fell to its weakest levels this year.

Read: China Says Release From Strategic Oil Reserves In the Works

What to watch this week:

For more market analysis, read our MLIV blog.

Some of the main moves in markets:

Stocks

  • The S&P 500 rose 0.2% as of 11:35 a.m. New York time

  • The Nasdaq 100 rose 0.8%

  • The Dow Jones Industrial Average fell 0.2%

  • The Stoxx Europe 600 fell 0.5%

  • The MSCI World index was little changed

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro rose 0.3% to $1.1352

  • The British pound was little changed at $1.3481

  • The Japanese yen fell 0.2% to 114.27 per dollar

Bonds

  • The yield on 10-year Treasuries was little changed at 1.58%

  • Germany’s 10-year yield declined three basis points to -0.28%

  • Britain’s 10-year yield declined four basis points to 0.92%

Commodities

  • West Texas Intermediate crude rose 0.4% to $78.69 a barrel

  • Gold futures fell 0.4% to $1,865.30 an ounce

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