In a volatile session on Friday, stocks were crushed into the close, setting up for a potential breakdown next week. Concerns about a resurgence in the coronavirus and a decline in the economy’s recovery along with technical factors like options expiration and index rebalancing sent stocks tumbling.
The Dow Jones Industrial Average closed down 208.64 points, or 0.8%, at 25,871.46, after gaining as much as 371 points earlier in the session. The S&P 500 traded 0.56% lower, after dropping 1.0% at one point, but quickly plummeted after the close. The Nasdaq Composite finished the session barely higher, also before selling off into the close.
Approximately $1.8 trillion in S&P 500 options were set to expire Friday, according to Goldman Sachs, making this the third-biggest non-December expiration in history.
“COVID cases have been spiking higher in certain US states …the issue is becoming too much for the market to ignore,” Vital Knowledge founder Adam Crisafulli said in a note Friday. “The problem has more to do with market expectations (way too complacent/calm) and psychology (with the consensus embracing the “V”-shaped narrative).”
Stock index ETFs are tumbled along with the underlying benchmarks. The SPDR Dow Jones Industrial Average ETF (DIA), SPDR S&P 500 ETF Trust (SPY), and Invesco QQQ Trust (QQQ) all finished the day in the red.
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