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U.S. stock indexes closed lower Friday, notching a third straight weekly loss, amid uncertainty about a fresh round of fiscal stimulus from Washington, concerns about tensions between the U.S. and China, and worries about the sluggish pace of economic recovery.
The day’s trading action also marked quadruple witching, which refers to the simultaneous expiration of single-stock options, single-stock futures, and stock-index options and stock-index futures, which has traditionally been associated with some intraday volatility.
How did major benchmarks trade?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.57% closed at 27,657.42, down 244.56 points or 0.9%. The S&P 500 index /zigman2/quotes/210599714/realtime SPX -0.72% shed 37.54 points, or 1.1%, to close at 3,319.47. Friday’s session marked the first time the broad index closed below its 50-day moving average, 3,343.42, since April 23. The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -0.87% fell 116.99 points, 1.1%, to close at 10,793.28. For the week, the Dow lost less than 0.1%, the S&P 500 was down 0.6%, and the Nasdaq fell 0.6%.
The Dow is down 2.72% for the month-to-date, the S&P500 down 5.17% and Nasdaq Composite down 8.34%.
What drove the market?
Investors continue to look for progress on fiscal stimulus talks in Washington which many consider crucial to underpin the economic recovery from the coronavirus pandemic and sustain the stock market’s gains.
Congressional lawmakers planned to introduce a bill Friday that would see the U.S. government funded through mid-December but U.S. House Speaker Nancy Pelosi said Friday the airlines and restaurant industries both need help that could be in another big economic stimulus package.
House Democrats had passed a $3.5 trillion relief bill in May, but more recently in negotiations with White House officials said they would accept a $2.2 trillion deal, the Wall Street Journal reported . House Speaker Nancy Pelosi said Democrats could push for more than their previous offer of $2.2 trillion but isn’t willing to advocate for anything less than her less proposal.
On the geopolitical front, the U.S. Commerce Department said Friday it is prohibiting transactions involving Tencent’s WeChat and Bytedance’s TikTok. The order makes no mention of the Oracle Corp . /zigman2/quotes/202180826/composite ORCL +0.29% deal with TikTok but said “the President has provided until November 12 for the national security concerns posed by TikTok to be resolved.” The news highlights lingering Sino-American testiness.
Investor angst over the impact of the Federal Reserve’s policy update on Wednesday is still rippling through the market also after the central bank indicated that the economic recovery could be a long one and that it did not expect to lift interest rates for at least another three or four years,
The central bank’s policy update on Wednesday marked its first since it outlined its average-inflation target strategy to avoid falling into the quicksand of low inflation by keeping interest rates close to 0% until the labor market achieves maximum employment and inflation has risen to its 2% target “and is on track to moderately exceed 2% for some time.”
That intention is “a unilaterally supportive message for stocks and risk assets over the long term,” said Michael Stritch, chief investment officer at BMO Wealth Management.
The challenge for investors, Stritch noted, is the near term. “We’re going to need some political clarity, and we have to get some vaccine clarity. There are a lot of assumptions out there right now and until some of those are confirmed or refuted, we will probably continue to see choppiness.”