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U.S. stocks struggle ahead of quadruple witching expiration

Stock MarketsDec 16, 2016 11:25AM ET
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© Reuters. Wall Street trades mixed as Dow fights to recover pre-Fed levels – Wall Street traded mixed on Friday, with the Dow struggling to hold the psychological level of 19,900 points, though volatility was expected around the closing bell.

At 11:17AM ET (16:17GMT), the Dow Jones gained 41 points, or 0.20%, the S&P 500 lost 1 point or 0.03%, while the tech-heavy Nasdaq Composite also slipped 1 point, or 0.03%.

Near the halfway point in the final trading session of the week, it seemed unlikely that the Dow Jones would recover levels seen prior to the Federal Reserve (Fed) announcement last Wednesday when the blue-chip index hit an all-time high of 19,996.43 points, only to have bulls’ hopes dashed when the Fed revealed that it now expected three rate hikes in 2017, up from the prior two.

Still, Friday is a “quadruple witch” expiration including stock options, index options, index futures and single-stock futures which normally is accompanied by high volatility in the last leg of the session.

“With the sharp moves made in the health care space this week, and the round trip made by the energy group, I would think that those areas would be the ones that see the heaviest action, and highest volatility after 3PM ET (20:00GMT) this afternoon,” Stephen Guilfoyle, president and founder of trading firm Sarge986, in an article published on Friday.

The economic calendar was light on Friday, while November housing starts and building permits fell more than expected.

Still on the docket, Richmond Fed president Jeffrey Lacker was scheduled to participate in a panel on the economic outlook.

Markets saw little chance of another rate hike in the mix for the next meeting in February, but were pricing in the odds of the first hike for June at 67.8%.

After three straight sessions of gains, investors took profit in the dollar. The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell 0.22% to 102.92 by 11:19AM ET (16:19GMT).

As the dollar weakened, gold moved higher, trading 0.59% higher to $1,136.45, though the precious medal was still on track for its sixth consecutive weekly decline.

Meanwhile, oil traded higher on hopes that major oil producers would follow through with their promise to reduce output starting in January.

Oil producers including Kuwait, Saudi Arabia, and Abu Dhabi, who are members of the Organization of the Petroleum Exporting Countries (OPEC), have reportedly notified customers that they would follow through with the planned cuts as part of an effort by OPEC and other producers led by Russia to balance an oversupplied market.

However, still ahead, markets would focus on the latest Baker Hughes’ data on the number of rigs actively drilling oil in the U.S. last week. The latest read saw the number of active rigs jump from 477 to 498 in its sixth consecutive ramp up of production.

U.S. crude futures gained 1.67% to $51.75 by 11:23AM ET (15:23GMT), while Brent oil traded up 1.85% to $55.02.

In big moves on earnings, Jabil Circuit (NYSE:JBL) jumped nearly 16% after the electronics makers smashed estimates.

On the downside, Oracle (NYSE:ORCL) slumped nearly 5% as revenue missed estimates and concern was raised over the cloud unit’s rate of growth.

Adobe (NASDAQ:ADBE) dropped close to 3% as forward guidance disappointed.

In other news, Gilead Sciences (NASDAQ:GILD) dropped around 1% after being ordered to pay Merck (NYSE:MRK) $2.5 million in a ruling on a patent infringement suit.

U.S. stocks struggle ahead of quadruple witching expiration

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