Large tech stocks continued their recent struggles on Friday, putting the major U.S. indexes at risk for a decline for the week. Traders braced for volatile moves as options and futures contracts approached expiration. The Commerce Department issued a new order about TikTok and WeChat as Oracle and ByteDance work with the Trump administration to find an acceptable deal.
Week by the numbers
- S&P 500 closed down 1.12% for its third straight negative day
- S&P 500 closed down 0.64% for the week, its third straight weekly loss for the first time this year
- S&P 500 is up 2.75% year to date
- Eleven out of 11 sectors were negative Friday led by tech down 2.49%
- Seven out of 11 sectors were negative this week led by consumer discretionary stocks down 2.34%
- Nasdaq Composite closed down 1.07% for its third straight negative day
- Nasdaq closed down 0.56% for the week, its third straight weekly loss for the first time this year
- Nasdaq is up 20.29% for the year
- Dow closed down 0.88% for its second straight negative day
- Dow closed down 0.03% for the week, its third straight weekly loss for the first time this year
- Dow is down 3.09% year to date. — Gina Francolla
Markets fall to finish the week
The major U.S. indexes lost ground on Friday as the struggles for the tech sector continued. The Dow lost 245 points, making it roughly flat for the week. The S&P 500 and Nasdaq Composite clinched weekly losses with Friday declines of 1.1% each. — Jesse Pound
Quadruple witching expirations could be exaggerating some tech stock moves
The decline in some technology stocks Friday could have been accelerated by the expiration of options on individual stocks and ETFs, which takes place at the market close.
The Nasdaq was down 1.5%, as tech names, like Apple, Amazon and Microsoft sold off. Those are among the names where investors had been aggressively buying call options. Options in Tesla are also actively traded, but that stock was higher.
"These moves in general are exacerbated on expiration. That's certainly true," said Chris Murphy, co-head derivative strategy at Susquehanna Financial.
The quarterly expiration comes after a summer of record buying in options by individuals and institutions, and many of them were bullish bets on technology and momentum stocks. Index options and futures expired at the opening bell Friday.
"If you look at the options activity, we knew it was elevated in the technology names for the month and the quarter," said Art Hogan, chief market strategist at National Securities. "It's definitely going to have a large influence on the underlying activity...It's probably had an impact on stocks today and earlier in the week."
Murphy pointed to the example of Apple, where there were many strike prices on call options just several dollars apart. As the stock fell through different September strike prices Friday, he said that could have triggered selling by market makers. Apple was down 2.7% at $107.38.
"That's going to have an effect," he said, noting there were strikes at $107.50, $108.75, and $110. "Between those three strikes, there's 59,000 open interest. Volume in those three strikes today is 275,000, so there's a lot of action."
He said there was a much heavier stock hedge at the beginning of the day. "Now that we've dropped through all those strikes, the market makers will be unwinding. It continues the theme of seeing bigger moves in stocks like Microsoft, Amazon, on expiration days," he said.
Oil posts best week since June
Oil posted its best week since June following a meeting between OPEC and its oil-producing allies where compliance with production cuts was stressed, and as Hurricane Sally shut down production in the Gulf Coast. West Texas Intermediate crude, the U.S. oil benchmark, advanced 0.34% on Friday to settle at $41.11 per barrel. For the week, the contract gained 10.13% for its first positive week in three, and its best week since June 5. International benchmark Brent crude shed 0.35% on Friday, but gained 8.34% for the week in its best weekly performance since June 19. - Pippa Stevens
Final hour of trading: Stocks down, but off their lows
The major averages were down with less than one hour left in the session amid tech's continuing struggles. The Dow traded 233 points lower, or 0.8%. The S&P 500 dipped 1.1% and the Nasdaq Composite declined by 1.2%. To be sure, all three indexes had rebounded slightly from their session lows. At one point, the Dow had fallen 414 points, or 1.5%. The Nasdaq briefly traded 2.5% lower and the S&P 500 fell as much as 1.9%. —Fred Imbert
Cruise stocks down sharply
Cruise stocks were among the worst performers in the S&P 500 on Friday. Shares of Norwegian Cruise Line Holdings and Carnival each lost about 6.5%, while Royal Caribbean fell 5.1%. On Thursday, Carnival announced that its P&O Cruises business would not sail again until the end of January 2021. — Jesse Pound
Dow falls nearly 400 points as stocks continue to slide
The Dow slid to a loss of roughly 370 points, or about 1.4%. The Nasdaq Composite and S&P 500 saw larger declines and were down 2.3% and 1.8%, respectively. The S&P 500 and Nasdaq broke below their recent intraday lows from last Friday. — Jesse Pound
Stocks making headlines in midday trading
U.S. Steel — U.S. Steel shares popped more than 9% after the company reported a smaller-than-expected loss for its fiscal third quarter. U.S. Steel posted a loss of $1.45 per share.
Beyond Meat – Beyond Meat fell more than 6% in midday trading on Friday after JPMorgan downgraded the alternative meat company due to "sluggish" fundamentals and said the stock was "ahead of itself."
SunPower — Shares of solar the storage company ticked 4% higher after Morgan Stanley upgraded the stock to equal weight from underweight. The Wall Street firm attributed the upgrade to possible margin expansion and higher storage penetration.
Dave & Buster's — Shares of the entertainment and restaurant chain continued to swing wildly, jumping nearly 13% on Friday. Raymond James upgraded the stock to outperform from market perform, saying its recent sell-off was "overdone."
Click here to see more companies on the move. — Yun Li
Markets at midday: Stocks fall as tech struggles continue
The major averages were down around midday as tech shares continued to underperform this week. The Dow slid 100 points, or 0.4%. The S&P 500 dipped 0.9% and the Nasdaq Composite dropped 1.4%. The S&P 500 tech sector fell nearly 2% and was headed for its first three-week losing streak since September 2019. —Fred Imbert
Financial security rose for families during the summer, Fed survey shows
Americans began to feel better about their financial security as spring turned to summer and the U.S. economy accelerated its reopening. An updated Federal Reserve survey released Friday afternoon showed that 77% of adults reported doing at least OK financially as of July, a total that had risen from 72% in early April amid the worst of the pandemic-related shutdown. Respondents indicated that government financial assistance had been key in keeping them afloat. Nearly one-fourth said they had received some form of aid, and 40% of those said their wages were higher than pre-pandemic levels. On the downside, 22% of those laid off said they did not expect to return to their jobs, compared to 7% in April. Lower-income workers were less likely to return to their jobs. —Jeff Cox
Unity Software surges 36% in market debut
Shares of Unity Software soared more than 36% on its first day of trading on Friday. The software company — which trades on the Nasdaq under ticker "U" — is trading above $70 per share, above its IPO price of $52 per share. Unity follows the market debut of software storage company Snowflake on Wednesday, the biggest software IPO in history. — Maggie Fitzgerald
Tesla battery day 'potentially narrative changing'
Tesla's battery day is coming up on Tuesday, and Morgan Stanley said it could be "potentially narrative changing" for the company. The firm's auto analyst Adam Jonas said he'll be watching for updates on several key metrics, including battery cost and longevity. Tesla shares gained more than 4% on Friday.
CNBC PRO subscribers can read more about Morgan Stanley's call here. - Pippa Stevens
Metrics show U.S. consumer spending decelerating in September
After a summer of better spending, U.S. consumers have again started rein in their budgets. JPMorgan, which tracks the amount its card users purchase from restaurants to grocery stores, said in a note published Friday that its tracker of consumer spending declined 3 percentage points from the prior week.
The decline in consumer spending may represent a concerning early sign that the effects of federal support for the U.S. economy made be starting to fade. Since consumer spending represents about two-thirds of U.S. economic activity, economists worry that a more persistent decline could lead to a slump in GDP at the end of the third quarter and into the fourth.
"Because the root cause of the shock is self-isolation driven by health concerns, there is limited capacity to restore economic activity without addressing the virus itself," writes Brown University economist John Friedman. — Thomas Franck
S&P opens in the green, Dow drops 20 points
The Dow Jones Industrial Average fell 120 points at the opening bell on Friday. The S&P 500 and Nasdaq moved 0.12% and 0.6% higher, respectively. After two weeks of losses for the major averages, stocks attempted to close the week with gains. — Maggie Fitzgerald
Oppenheimer downgrades Lowe's, Home Depot
Oppenheimer lowed its rating for the two major home improvement retail companies to perform from outperform on Friday. The firm said in a note that the industry was facing a "post-pandemic reset" that would make it hard to achieve near term sales growth.
CNBC Pro subscribers can read more about the call here. — Jesse Pound
Bank of America says it time to load up on small caps
Bank of America strategist Jill Carey Hall thinks investors will benefit from "tilting towards small caps over large caps" going forward as the economy continues to recover from the coronavirus shock.
"Recovery regimes are typically the best phase for both small caps and Value stocks, where (based on data since 1990), small caps have outperformed 75% of the time in this phase," Hall said in a note to clients. "Value-oriented cyclical sectors such as Industrials and Materials have moved to the top of our small cap tactical sector framework."
The Russell 2000, which tracks small-cap stocks, has lagged the large-cap S&P 500 this year. The index is down 7.5% in 2020 and the S&P 500 is up nearly 4%. However, the Russell 2000 has outperformed the large-cap index over the past six months with a 55.6% rally. —Fred Imbert
Snowflake rising in premarket
After shares of Snowflake gave back 10% of their IPO pop on Thursday, the stock was moving higher again on Friday morning. The software stock gained 2.4% in premarket trading, bringing it back to $233 per share. That is just under a 100% gain from the IPO price of $120 per share. The company went public on Wednesday. — Jesse Pound
Investors remain leery that the Fed can meet its inflation goal
The Federal Reserve's new approach to inflation is drawing skepticism from investors. Following its policy meeting this week, the Fed emphasized that it will allow inflation to run above 2% "for some time" and won't raise interest rates until the desired "outcomes are achieved." However, some investors remain unconvinced that a decade of low inflation, at least as the Fed measures it, will be reversed even with the Fed's new verbiage. "Inflation has been an enigma for the Fed for a decade," said Art Hogan, chief market strategist at National Holdings. "There wasn't much detail on how this would work," added Yung-Yu Ma, chief investment strategist at BMO Wealth Management. Market participants in particular pointed to longer-term inflation forecasts that the Fed also released Wednesday. None of the 17 Federal Open Market Committee members projected inflation to break 2% through at least 2023. — Jeff Cox
Here are Friday’s biggest analyst calls of the day: Home Depot, Beyond Meat, Dollar General, Tesla & more
- Raymond James upgraded Dave and Buster's to outperform from market perform.
- Citi initiated Utz Brands as buy.
- JPMorgan downgraded Beyond Meat to underweight from neutral.
- JPMorgan raised its price target on Dollar General to $250 from $230.
- Berenberg initiated Ambarella as buy.
- Oppenheimer downgraded Home Depot and Lowe's to perform from outperform.
- Argus upgraded Foot Locker to buy from hold.
- Piper Sandler raised its price target on Tesla to $515 from $480.
Pro Subscribers can read more here. - Michael Bloom
Two Goldman Sachs employees said to test positive for Covid-19
Two employees at Goldman Sachs' downtown New York City headquarters have tested positive for Covid-19, a company official told The New York Times. The two employees work on different floors. The Times reported that Goldman officials believe the cases came from exposure to the coronavirus outside the office, where more workers have been returning in recent weeks. "Our people's safety is our first priority and we are taking appropriate precautions to make sure our workplaces remain safe for those who choose to return," Leslie Shribman, a Goldman spokeswoman, told The Times. Earlier this week, J.P. Morgan Chase sent workers home after a company employee was found to be positive for the virus. - Matt Belvedere
Trump to ban Americans from downloading TikTok and WeChat on Sunday amid ByteDance negotiations
The Commerce Department said Friday it is planning to block U.S. citizens from downloading Chinese-owned messaging app WeChat and video sharing app TikiTok starting on Sunday. The Trump Administration and TikTok parent ByteDance are in negotiations over the U.S. assets of TikTok and whether the government will approve a deal for Oracle to take a minority stake in the video app.
"At the President's direction, we have taken significant action to combat China's malicious collection of American citizens' personal data, while promoting our national values, democratic rules-based norms, and aggressive enforcement of U.S. laws and regulations," Commerce Secretary Wilbur Ross said in a statement Friday.
Oracle said this week it struck a deal with ByteDance to be the U.S. partner of the popular video app, pending U.S. government approval. However, Reuters reported President Trump could still reverse the ban before the Sunday deadline as ByteDance and the U.S. attempt to agree on a deal. Shares of Oracle ticked 1.5% lower in premarket trading on Friday. — Maggie Fitzgerald
'Time to start putting cash to work,' says Cramer
CNBC's Jim Cramer believes it's time for investors to get back into the market, and he's specifically eyeing cyclical stocks.
"I think it's time to start putting cash to work. Instead of tech, though, I recommend picking up some of [the] historically cheap stocks that are being brought down by the entire averages," the "Mad Money" host said, noting that money is coming back into names like Dow Inc., Caterpillar and 3M. - Pippa Stevens
Stock futures mixed
Futures tied to the major U.S. averages were mixed during premarket trading on Friday. Dow Jones Industrial Average futures fell 0.05%, while S&P 500 futures advanced 0.19%. Nasdaq 100 futures were up 0.6%.
All the major averages fell during Thursday's session as a sell-off in technology names weighed on the broad market. But the Dow, S&P 500 and Nasdaq Composite are still on track to end the week higher, which would be the first positive week in the last three. - Pippa Stevens