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Stocks wrapped up a rough week with an ugly Friday. The lackluster performance came as the Federal Reserve continued to rapidly end its monetary support program for markets and the economy—with activity in the options market adding insult to injury.
On Friday, the
Dow Jones Industrial Average
fell 532 points, or 1.5%, while the
S&P 500
fell 1%, and the
Nasdaq Composite
dropped 0.1%.
For the week, the Dow, the S&P 500 and the Nasdaq Composite fell 1.7%, 2% and 2.9%, respectively. The S&P 500 Information Technology Sector, meanwhile, fell 3.9% over the same time period, in its worst weekly performance so far this year.
There’s no doubt that investors should be concerned about central bankers’ hawkish tilt, after the Federal Reserve’s decision Wednesday to accelerate the end of quantitative easing and to pencil in three interest-rate increases for next year. The Bank of England’s rate increase from 0.1% to 0.25% also finally caught up with investors.
“Investors [continue to] digest the hawkish shift by most global central banks this week while concerns about the health of the economy rebound continue,” wrote Tom Essaye, founder of Sevens Report Research.
Other banks, however, are taking it far more easy. The Central Bank of Japan Friday seemed to side with the European Central Bank by striking an overall dovish tone, even as it announced it would pull back some of its emergency Covid-19 pandemic funding. Governor of the Bank of Japan Haruhiko Kuroda insisted that monetary stimulus would continue, and that borrowing costs would remain low in the months to come.
But sometimes markets can move because of internal factors rather than anything fundamental, and that may be the case now, said NatAlliance Securities’ Andrew Brenner. Friday, he noted, is “quadruple witching,” the term for when stock options, stock-index futures, single-stock futures, and index options all expire on the same day. On these days, market makers are forced to hedge positions, which can create feedback loops that drive stocks lower.
The market has seen some additional volatility because of the options market Friday, wrote Edward Moya, senior market analyst at Oanda.
“As traders unwind these trades it can result in greater volatility,” wrote JJ Kinahan, chief market strategist at TD Ameritrade.
And while tech stocks were off of their worst levels of the day, most stocks still ended the day down. About three quarters of stocks on the S&P 500 were lower, according to FactSet.
Asian stocks were nearing 13-month lows Friday, with Japan’s
Nikkei 225
index closing down 1.8%, and Hong Kong’s
Shanghai composite
both down 1.2%.
European markets followed the general trend, with the pan-European Stoxx 600 index down 0.6%.
Oil prices were falling, with U.S. crude losing 1.9% to $70.47 a barrel.
Here are six stocks on the move Friday:
Shares in electronic-medical records company
Cerner
(ticker: CERN) finished up 12.9%, after The Wall Street Journal reported that software maker
Oracle
(ORCL) was in talks to acquire the company in a deal that would value it at around $30 billion.
Oracle
stock dropped 6.4%.
U.S. delivery group
FedEx
(FDX) gained 5% as the company reinstated its original 2022 fiscal forecast after easing concerns about labor shortages.
Shares in
Rivian
(RIVN) fell 10.3% after the electric-vehicle company acknowledged, in its first results presentation since listing, that expected production this year would fall short of target, and disappointed investors with preorder numbers below forecast.
U.S. Steel
(X) declined 1.6%, after publishing lower-than-expected fourth-quarter guidance for its earnings before interest, taxes depreciation and amortization.
Tesla
(TSLA) rose 0.6% after the company’s CEO, Elon Musk, sold more shares.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com, Pierre Briançon at pierre.briancon@dowjones.com and Ben Levisohn at ben.levisohn@barrons.com
Read More: Dow Drops More Than 500 Points to End a Nasty Week