Stocks Settle Mixed as Triple Witching Sparks Short Covering

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Friday closed up +0.22%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.13%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.24%. 

Stocks on Friday settled mixed, recovering some of Thursday’s sharp losses.  Strength in technology stocks Friday led the overall market higher.  Friday was the quarterly expiration of stock futures and options known as triple witching.  The expiration of $3.5 trillion in option positions and the weight-rebalancing of many indexes lent support to stocks Friday.

Stock prices early Friday were under pressure after U.S. economic data on May industrial and May manufacturing disappointed.  Also, comments from Fed Chair Powell boosted T-note yields and bolstered speculation the Fed will pursue aggressive rate hikes to tame inflation. In addition, a more than -6% slide in crude oil prices to a 4-week low Friday weighed on energy stocks.

A positive for stocks is data from EPFR Global showing that U.S. stocks attracted $14.8 billion in inflows in the week through June 15. U.S. stock indexes also have carry-over support from a rally in European stocks today after Bank of America Friday raised its recommendation on European stocks to neutral from negative.

U.S. May manufacturing production unexpectedly fell -0.1% m/m, weaker than expectations of +0.3% m/m and the first decline in four months.  Also, May industrial production rose +0.2% m/m, weaker than expectations of +0.4% m/m.

Minneapolis Fed President Kashkari said, "while I supported increasing the federal funds rate by 75 bp at this week's meeting and could support such a move in July, this uncertainty about how much tightening will be needed leads me to be cautious about too much more front-loading."

Fed Chair Powell said, “my colleagues and I are acutely focused on returning inflation to our 2% objective and the fight to restore price stability is unconditional.  The Federal Reserve’s strong commitment to our price-stability mandate contributes to the widespread confidence in the dollar as a store of value.”

Today’s stock movers…

Technology stocks rallied Friday as they recovered some of this week’s rout. Atlassian Corp Plc (TEAM) and Lucid Group (LCID) closed up more than +7%.  Also, Okta (OKTA), Datadog (DDOG), and Crowdstrike Holdings (CRWD) closed up more than +4%.  In addition, Intuit (INTU), Zoom Video Communications (ZM), and Splunk (SPLK) closed up more than +3%. 

Bank and credit card stocks gained Friday after Baird raised its recommendation on the stocks to outperform from neutral.  Capital One Financial (COF) and Discover Financial Services (DFS) closed up more than +5%.  Also, American Express (AXP) closed up more than +4% to lead gainers in the Dow Jones Industrials.  In addition, Fifth Third Bancorp (FITB), Wells Fargo (WFC), and Signature Bank/New York (SBNY) closed up more than +2%.   

Travel stocks and cruise line operators moved higher Friday after crude prices dropped to a 4-week low, which may lower fuel costs and boost company earnings. Norwegian Cruise Line Holdings (NCLH) closed up more than +10% to lead gainers in the S&P 500.  Also, Carnival (CCL) closed up more than +9%.  In addition, American Airlines Group  (AAL) and Royal Caribbean Cruises (RCL) closed up by more than +5%, and Alaska Air Group (ALK) and United Airlines Holdings (UAL) closed up by more than +4%. 

Seagen (SGEN) closed up more than +12% Friday to lead gainers in the Nasdaq 100 after Dow Jones reported that Merck is considering purchasing the company.

Citrix Systems (CTXS) closed up more than +5% Friday after filing with the European Commission for its proposed $16.5 billion sale to Elliot Management and Vista Equity. 

A drop of more than -6% in crude oil prices Friday to a 4-week low weighed on energy stocks and energy service providers.  Diamondback Energy (FANG) closed down more than -8% to lead losers in the S&P 500.  Also, Devon Energy (DVN) and ConocoPhillips (COP) closed down by more than -8%.  In addition, Marathon Oil (MRO), Valero Energy (VLO), Exxon Mobil (XOM), and Haliburton (HAL) closed down more than -5%.  Finally, Chevron (CVX) closed down more than -4% to lead losers in the Dow Jones Industrials.

Match Group (MTCH) closed down more than -5% Friday to lead losers in the Nasdaq 100 as the company is under pressure from the FTC to cooperate with an investigation into whether its OKCupid app illegally shared data with a facial recognition company.

Across the markets…

Sep 10-year T-notes (ZNU22) on Friday closed up by +12 ticks, and the 10-year T-note yield rose +4.4 bp to 3.239%.  T-notes on Friday rebounded from early losses and closed moderately higher. Weaker-than-expected U.S. economic data Friday on May manufacturing production and industrial production gave T-note prices a boost. 

T-notes also garnered support Friday after the Fed released its semiannual report to Congress ahead of Fed Chair Powell’s testimony next week, noting the Fed’s commitment to restoring price stability “is unconditional.” 

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