S&P 500 Falls as ‘Triple Witching’ Jolts Nvidia: Markets Wrap

(Bloomberg) — Wall Street’s massive expiration of options not only left stocks struggling, it also drove one of the leaders of the bull market to a roller-coaster ride.

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About $5.5 trillion are estimated to expire Friday during a quarterly episode known as “triple witching” in which derivatives contracts tied to equities, index options and futures mature — compelling traders en masse to roll over their existing positions or start new ones. This time around, Nvidia Corp. is playing an added role. The value of contracts tied to the chipmaker due Friday is the second-largest of any underlying asset, lagging only the S&P 500.

As the contracts disappear, investors will adjust their positions, adding a burst of volume capable of swinging individual holdings. The S&P 500’s trading volume was 60% above the past month average. Nvidia almost erased a plunge of about 5% before pushing lower again.

The options event comes at a critical juncture for markets positioning for the second half of 2024 and the Federal Reserve’s next steps. Data showed US services activity picked up early this month to the fastest pace in more than two years. Separately, sales of existing homes fell for a third straight month.

“Investors should brace for drama,” said Solita Marcelli at UBS Global Wealth Management. “The second half of 2024 is shaping up to be a time of transition and volatility. The decisions that investors make now will be key to navigating this period effectively.”

The S&P 500 fell to around 5,460. Nvidia has lost about $200 billion in two days. Treasury 10-year yields were little changed at 4.26%. France’s risk premium over Germany closes at the highest since 2012.

The ongoing AI frenzy that briefly made Nvidia the world’s most-valuable company this week also drove record inflows into tech funds, said Bank of America Corp. strategists. About $8.7 billion flowed into tech funds in the week through June 19, according to a note from the bank citing EPFR Global data.

“The ‘all roads lead to Nvidia’ trade is once again bolstered” as Europe falters amid the political turmoil in France, strategist Michael Hartnett said. Still, while investors still feel they need more exposure to AI-related plays, “all asset allocators are concerned about the equity concentration risk.”

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Corporate Highlights:

• Apple Inc. is withholding a raft of new technologies from hundreds of millions of consumers in the European Union, citing concerns posed by the bloc’s regulatory attempts to rein in Big Tech.

• Airbus SE is edging closer to an agreement with Spirit AeroSystems Holdings Inc. to take over parts of the aerospace supplier’s business, paving the way for an acquisition of the bulk of the company by arch-rival Boeing Co. as early as next week.

• American Airlines Group Inc. is suspending training for new pilots through the end of this year, the latest pullback by a major US carrier in the face of uneven travel demand and delayed aircraft.

• A top US Food and Drug Administration official overrode reviewers to give broad approval to Sarepta Therapeutics Inc.’s gene therapy for a rare muscle disease in children, despite a lack of data showing it actually slows overall progression of the disease.

• Carlsberg AS said it’s weighing its options after Britvic Plc rejected unsolicited takeover bids that valued the UK soft-drink maker at as much as £3.1 billion ($3.9 billion).

• Prime Minister Justin Trudeau’s government is preparing potential new tariffs on Chinese-made electric vehicles to align Canada with actions taken by the US and European Union, according to people familiar with the matter.

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.3% as of 1:35 p.m. New York time

• The Nasdaq 100 fell 0.4%

• The Dow Jones Industrial Average was little changed

• The MSCI World Index fell 0.4%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0692

• The British pound fell 0.2% to $1.2638

• The Japanese yen fell 0.4% to 159.55 per dollar

Cryptocurrencies

• Bitcoin fell 2.5% to $63,438.73

• Ether fell 1.5% to $3,470.06

Bonds

• The yield on 10-year Treasuries was little changed at 4.26%

• Germany’s 10-year yield declined two basis points to 2.41%

• Britain’s 10-year yield advanced three basis points to 4.08%

Commodities

• West Texas Intermediate crude fell 0.8% to $80.67 a barrel

• Spot gold fell 1.7% to $2,319.27 an ounce

This story was produced with the assistance of Bloomberg Automation.

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