September 18, 2020

A day of volatile trading yesterday left the U.S. equity market with moderate losses across the board.  The Dow and S&P 500 dropped 130.40 and 28.48 points, or -0.47% and -0.84%, respectively.  Technology stocks sagged again, losing 140.19 points, or -1.27%.

There seem to be two forces at work this week.  First, the market is watching an economy that is continuing to improve, albeit at a slowing rate.  Weekly unemployment claims and U.S. retail sales showed decent numbers this week, at or near expectations, but no real sign of substantial improvement.  Second, the markets seem also to be waiting for guidance from Washington regarding the continuation of increased jobless benefits.  With the increased benefits from the federal government, in addition normal state benefits, the consumer was willing to increase spending – the intended purpose of the increased benefits.  Without the additional benefits, the consumer seems content to sit on their hands in terms of spending.

With less than 30 minutes to the opening of trading today, all major market indices are showing a small gain at the opening, including the Dow, S&P 500, NASDAQ and the Russell 2000 (an index for small capitalization stocks).  But watch for increased volatility today as this is what is called a “quadruple witching,” which refers to the simultaneous expiration of single-stock options, single stock futures, stock-index options and stock-index futures.  This complex series of options and futures contract expirations, especially towards the end of the trading day, may be the root cause for wildly moving markets.