US STOCKS-Wall Street drops as stimulus rally cools, Tesla hits record high

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* ‘Quadruple witchcraft’ to increase volumes, volatility

* Tesla increases in high volume trading

* Indices down: Dow 0.7%, S&P 500 0.7%, Nasdaq 0.3% (late afternoon updates)

Dec. 18 (Reuters) – U.S. stocks fell on Friday, driven by uncertainty surrounding a coronavirus stimulus deal, while Tesla shares hit a lifetime high ahead of their addition to the S&P 500 next week.

All three major indices hit record highs on the open before retreating. The S&P 500 technology index, which led the gains this week, was the biggest drag for the overall benchmark, followed by healthcare.

Electric car maker Tesla Inc was up 2.5% in volume terms, will become the most valuable company to ever be added to Wall Street’s main benchmark on Monday.

“You are already seeing significant volume levels in Tesla shares today which are moving much higher as a lot of these different ETFs and mutual funds are positioning ahead of the change to get us as close to price as possible for the purpose of trading. ‘tracking error,’ said Lindsey Bell, chief investment strategist at Ally Invest in Charlotte, North Carolina.

Investors see increased trading volumes throughout the day due to the expiration of stock index futures, stock index options, stock options and single stock futures at the end of the trade , also known as quadruple witchcraft. On Friday it was increasingly unlikely that the US Congress would meet the deadline to agree on $ 900 billion in fresh COVID-19 aid and could instead pass a third interim spending bill to prevent the government from shutting down at midnight.

Recent weak economic data has increased pressure on lawmakers to reach a deal.

“Investors really want to see something come to fruition or like to see something happen on the stimulus front as soon as possible, as cases of COVID continue to rise and economic data has shown it is starting to deteriorate.” , Bell said.

The Dow Jones Industrial Average fell 215.51 points, or 0.71%, to 30,087.86, the S&P 500 lost 27.36 points, or 0.73%, to 3,695.12 and the Nasdaq Composite fell by 38.87 points, or 0.3%, to 12,725.88.

Trading may become more volatile as the close approaches.

“There’s a lot more volume, but I don’t necessarily think it has a true directional basis,” said Christopher Murphy, co-director of derivatives strategy at Susquehanna Financial Group. “Everyone really wanted a stimulus package by the end of the day. If we don’t get it, the market will be down. This is going to trump anything to do with quad witchcraft.

The prospect of continued monetary and fiscal stimulus has helped stocks look past the economic impact of the pandemic and prepare them for strong annual gains, despite a difficult start to the year.

FedEx Corp fell 5.3% after failing to give a profit forecast for 2021, even as its quarterly profit nearly doubled.

Shares of Rival United Parcel Service Inc also fell. Microsoft Corp fell 1.2% after saying it found malware in its systems linked to a massive hacking campaign revealed by U.S. officials this week.

Falling issues outnumbered those that rose on the NYSE by a ratio of 1.41 to 1; on the Nasdaq, a ratio of 1.11 to 1 favored the advancers.

The S&P 500 posted 32 new 52 week highs and no new lows; the Nasdaq Composite recorded 280 new highs and 7 new lows. (Reporting by Karen Pierog in Chicago and Caroline Valetkevitch in New York; Additional reporting by April Joyner in New York, Ambar Warrick and Shreyashi Sanyal in Bengaluru; Editing by Maju Samuel and Shounak Dasgupta)

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