Stocks Remain Soft As Oil Markets Retreat

Submitted by News Desk on

U.S. stock futures crept down ahead of fresh data on consumer sentiment, pointing to a subdued end to a choppy week in markets. 

Futures tied to the S&P 500 ticked down 0.1%, pointing to a tepid finish for the broad-market index that has gained 0.3% this week so far. Nasdaq-100 futures were relatively unchanged and Dow Jones Industrial Average futures declined 0.1%. 

Stocks have seesawed this week as investors grappled with mixed economic data in the U.S. and China and the spread of the Covid-19 Delta variant. This week brought the first sign of in elation easing and an unexpected boost to retail sales, but also a slight rise in Americans applying for initial jobless claims, a proxy for layoffs.  

“What this week tells us is that there’s going to be this bumpy normalization for the foreseeable future. All this mixed data puts us a bit in limbo,” said Ludovic Subran, chief economist at Allianz. “The return of volatility in an environment that is a bit of an in-between time is very probable.” 

Options and futures are set to expire Friday in a quarterly event known as quadruple witching, which is likely contributing to market volatility. More than $750 billion of single-stock options will mature, according to Goldman Sachs analysts.

“This is one of the larger expirations of all time,” said Charlie McElligott, a cross-asset strategist at Nomura. Dealers typically hedge against the options they buy and sell, and when they expire, the market can begin to move more as they hedge less, he said. 

The yield on the benchmark 10-year U.S. Treasury note ticked up to 1.341%, from 1.331% Thursday. 

The Treasury yield curve has been flattening this week, signaling that investors are positioning ahead of the Federal Reserve monetary policy meeting that will begin Tuesday, according to Chris Jeffery, head of rates and inflation strategy at Legal & General Investment Management.

“That’s telling us the market is starting to worry more about the Fed,” he said. 

Oil prices pulled back after five consecutive days of gains. Brent, the global benchmark for crude, declined 0.2% to trade at $75.51. It is still up more than 3% for the week due to tighter supply from restrictions on OPEC and lingering supply disruptions in the Gulf of Mexico in the wake of Hurricane Ida, according to analysts at Commerzbank.

Bitcoin rose about 0.8% from the level at 5 p.m. Thursday, trading at around $47,500, according to data from CoinDesk. The cryptocurrency fell below $44,000 earlier in the week before recovering some ground. 

Overseas, the pan-continental Stoxx Europe 600 edged down 0.1%. Travel stocks rallied on reports that the U.K. would ease restrictions. International Consolidated Airlines rose 6.4% and Deutsche Lufthansa added 4.6%. Norwegian chemical firm Yara International fell 2% after saying it was curtailing ammonia production due to soaring natural gas prices. 

In Asia, most major benchmarks rose. The Shanghai Composite Index edged up 0.2%, while Hong Kong’s Hang Seng closed up 1%. The mainland China benchmark is down more than 2% for the week after a range of Chinese economic indicators signaled a pullback in growth and giant property developer Evergrande’s debt problems weighed on sentiment. 

“This has been a stone in the shoe of markets and these events are coming to a head, but it’s hard to see how this develops in a way that’s too destructive,” Mr. Jeffery said.