Market Snapshot: Dow and S&P 500 set to test record highs as Trump administration said to exempt China products from tariffs

U.S. stocks on Friday were on track to open near records as investors looked beyond a litany of central-bank decisions of the past week and focused on signs of improving China-U.S. trade developments.

However, some investors expect volatility in the market given it’s quadruple witching day on Wall Street, the quarterly expiration of futures and options on indexes and stocks at the same time which usually spurs higher volumes.

How are markets performing?

Futures for the Dow Jones Industrial Average YMZ19, +0.23% were climbing 47 points, or 0.2%, at 27,133, those for the S&P 500 ESZ19, +0.22% rose 5.75 points, or 0.2%, to 3,011.5, while Nasdaq-100 futures NQZ19, +0.34% advanced 24 points to reach 7,920.25, a climb of 0.3%.

On Thursday, the Dow DJIA, -0.19% fell 52.29 points, or 0.2%, to end at 27,094.79, while the S&P 500 index SPX, +0.00% clung to a gain of 0.09 point, or less than 0.1%, to close at 3,006.82. The Nasdaq Composite Index COMP, +0.07% added 5.49 points, or 0.1%, finishing at 8,182.88. The S&P 500 traded as high as 3,021.99 earlier Thursday — within striking distance of its all-time closing high of 3,025.86 set on July 26.

What’s driving the market?

Wall Street stocks were trending upward to end the week, with reports that President Donald Trump was exempting hundreds of Chinese products from tariffs, according to Politico, citing documents from the U.S. Trade Representative, which indicate that Christmas tree lights, pet supplies and plastic straws are among some of the products being exempted.

The exemption list is set to be published later Friday by the USTR, according to CNBC, with the move, perhaps, offering a modicum of optimism for investors.

The exemptions also come as lower-level Washington and Beijing delegates are meeting for a second day to set the stage for more substantive tariff talks in early October. Two negotiating sessions over the two days will cover agricultural issues, while just one will be devoted to the strengthening of China’s intellectual protections and forced transfer of US technology to Chinese firms, Reuters reported. Some of the Chinese delegation will visit US farming regions next week, though China’s Global Times and White House adviser Michael Pillsbury expressed caution about the prospects for a deal on Thursday.

Traders, however, expect that the major driver of action in the equity market Friday could be the simultaneous expiration of equity options & futures, and index options & futures, a so-called quadruple witching while the S&P 500 index, S&P 400 and Sox Semi index will rebalance Friday as well.

“Friday should be a massive liquidity day for equities markets due to Quad Witching and the rebalancing of several major index families, pensions planning to rebalance could use this as a prime opportunity to trade into (or out of) positions ahead of month-end,” wrote Dave Lutz, head of ETF Trading at JonesTrading in a Friday note. “With the S&P 500 outperforming on both a monthly and quarterly basis versus other asset classes, this results in a current projection of $17bn in selling of U.S. equities from pension funds.”

Meanwhile, St. Louis Federal Reserve President James Bullard explained his dissent from the Federal Open Market Committee’s decision on Wednesday to reduce rates by a quarter percentage point, marking the second rate cut in as many Fed meetings. Bullard said he advocated for a more substantial 50 basis-point cut because he thinks the manufacturing sector already appears to be in recession.

On Wednesday, during a news conference to discuss the rate decision, Fed Chairman Jerome Powell said the central bank would do what was needed to keep the U.S.’s economic expansion going.

Beyond Bullard’ statement, a number of Fed speakers are on deck, including New York Federal Reserve Bank President John Williams, who will speak in Zurich at 8:15 Eastern Time about monetary policy.

Boston Federal Reserve Bank President Eric Rosengren, who was one of the dissenters in Wednesday’s Fed decision, advocated for holding rates steady, will speak at 11:20 a.m. at New York University, while Dallas Federal Reserve Bank President Robert Kaplan is slated to participate in a question-and-answer at 1 p.m. in Texas.

On the economic data front, the Federal Reserve will release its estimate of household debt growth for the second quarter, at noon Eastern Time.

Which stocks are in focus?

Shares of Apple Inc. AAPL, -0.81%  were up 0.3% in premarket trade Friday, as the new iPhone 11 goes on sale for the first time in stores. J.P. Morgan analyst Samik Chatterjee said that healthy pre-orders for the product indicates a “robust” trend for iPhone revenue. The gains put the stock on track to reclaim a trillion-dollar valuation during Friday trade.

Netflix Inc. NFLX, -1.70%  stock fell 1.3% before the opening bell Friday, putting it on track for its third consecutive loss, after falling 2.4% and 1.7% Wednesday and Thursday, respectively.

Shares of McDermott International Inc. MDR, -26.85%  soared 75% in premarket action Friday, after the energy-services company said it was exploring a sale of its Lummus Technology business, which has been valued at $2.5 billion. McDermott’s market cap sat at 287.1 million as of Thursday’s close. The stock plummeted 73% week-to-Thursday’s close over concerns that the firm was considering bankruptcy.

How are other markets trading?

In commodities, oil futures rose, with West Texas Intermediate crude for October delivery  CLV19, +1.67%  on the New York Mercantile Exchange rose 0.9%, to trade at $58.65 a barrel.

Gold GCZ19, +0.10% rose 0.1% to trade at about $1,507 an ounce, while the U.S. dollar, as measured by the ICE U.S. Dollar Index DXY, +0.21%, a gauge of the buck against a basket of leading rivals, edged 0.1% higher.

Bond yields rose Thursday afternoon. The 10-year U.S. TMUBMUSD10Y, -0.67%  note was little changed at 1.778%, while the 2-year TMUBMUSD02Y, -0.18% was slightly lower at 1.739%.

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