Major Averages Close Mixed Following Extremely Volatile Session On Wall Street

wallstreet aug31 17jun22 lt

Following the sell-off seen during trading on Thursday, stocks saw substantial volatility over the course of the session on Friday. The major averages showed wild swings as the day progressed before finishing the session mixed.

While the tech-heavy Nasdaq jumped 152.25 points or 1.4 percent to 10,798.35 and the S&P 500 crept up 8.07 points or 0.2 percent to 3,674.84, the narrower Dow edged down 38.29 points or 0.1 percent to 29,888.78, closing at its lowest level since December of 2020.

Despite the mixed performance on the day, the major averages all moved sharply lower for the week. The Dow and the Nasdaq both plunged by 4.8 percent, while the S&P 500 tumbled by 5.8 percent for its worst week since 2020.

The volatility on Wall Street came amid a "quadruple witching" day, which refers to the simultaneous expiration of stock index futures, single-stock futures, stock options and stock index options.

Traders may also have been expressing some uncertainty about the near-term outlook for the markets following Thursday's sell-off, which reflected concerns about the economic impact of aggressive monetary policy tightening.

In U.S. economic news, the Federal Reserve released a report showing industrial production increased by less than expected in the month of May,

The Fed said industrial production crept up by 0.2 percent in May after surging by an upwardly revised 1.4 percent in April.

Economists had expected production to rise by 0.4 percent compared to the 1.1 percent jump originally reported for the previous month.

"The muted 0.2% m/m rise in industrial production in May adds to the evidence that the economy is slowing," said Andrew Hunter, Senior U.S. Economist at Capital Economics.

He added, "But there is still little in activity data to suggest a recession is on the horizon, or to dissuade the Fed from pressing ahead with more aggressive policy tightening."

A separate report from the Conference Board showed a continued decrease by its reading on leading U.S. economic indicators in the month of May.

The report showed the Conference Board's leading economic index fell by 0.4 percent in May, matching the revised drop seen in April as well as economist estimates.

"The US LEI fell again in May, fueled by tumbling stock prices, a slowdown in housing construction, and gloomier consumer expectations," said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board.

He added, "The index is still near a historic high, but the US LEI suggests weaker economic activity is likely in the near term—and tighter monetary policy is poised to dampen economic growth even further."

Sector News

Airline stocks showed a substantial move back to the upside on the day, with the NYSE Arca Airline Index soaring by 5.2 percent after ending Thursday's trading at its lowest closing level in almost two years.

Significant strength was also visible among biotechnology stocks, as reflected by the 3.5 percent spike by the NYSE Arca Biotechnology Index.

Networking and computer hardware stocks also turned in strong performances, contributing to the jump by the tech-heavy Nasdaq.

On the other hand, energy stocks moved sharply lower along with the price of crude oil. Crude for July delivery plummeted $8.03 to $109.56 a barrel amid concerns about the outlook for demand.

Reflecting the weakness in the energy sector, the NYSE Arca Oil Index plunged by 5.8 percent, the Philadelphia Oil Service Index dove by 4.6 percent and the NYSE Arca Natural Gas Index tumbled by 4.2 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Friday. Japan's Nikkei 225 Index tumbled by 1.8 percent, while China's Shanghai Composite Index jumped by 1 percent.

The major European markets also finished the day mixed. While the German DAX Index advanced by 0.7 percent, the French CAC 40 Index edged down by 0.1 percent and the U.K.'s FTSE 100 Index fell by 0.4 percent.

In the bond market, treasuries extended the upward move seen over the two previous sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell 6.8 basis points to 3.294 percent.

Looking Ahead

Following a very busy week on the U.S. economic front, the economic calendar for next week is relatively quiet.

Traders are still likely to keep an eye on Congressional testimony by Fed Chair Jerome Powell as well as reports on new and existing home sales.

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