Sept. 17 Reuters - U.S. stock indexes slipped on Friday with major technology firms bearing the most, while uncertainty over higher corporate taxes and an upcoming Federal Reserve meeting weighed traders to the sidelines.
The Nasdaq was the worst performer amongst the main U.S. indexes in early trading, as a batch of strong economic readings encouraged investors to pivot into growth-exposed sectors and out of tech this week.
It was a volatile week and a return to value outperformance as 'buy the dip' sentiments took hold, but not enough to rescind the recent market weakness, said Louise Dudley, global equities portfolio manager at Federated Hermes.
Concerns that a potential hike in corporate taxes could eat into earnings also weighed on markets, as leading Democrats sought to raise the top tax rate on corporations to 26.5% from the current 21%.
We anticipate large cap volatility as changes to U.S. corporate tax rates play a role in the American economy moving forward as the two sides negotiate, particularly for the'small tax' sectors involved such as technology and biotech, and companies with hefty international revenues, Dudley added.
Focus is also on the next meeting of the Federal Reserve, with investors debating if a batch of strong economic data this week could spur the bank to shorten its timeline for reducing monetary stimulus.
Wednesday's data showing an unexpected rise in retail sales came on heels of a steady factory activity reading and a cooling in inflation, suggesting the U.S. economic recovery was resilient despite a recent rise in cases of the Delta COVID 19 variant.
Treasury yields rose on the data, indicating more optimism over the economy as investors sold safe haven bonds.
At 09:56 am ET, the Dow Jones Industrial Average fell 106.41 points or 0.31% at 34,644 for the Dow Jones Industrial Average. 91, the S&P 500 lost 23.35 points, or 0.52 to 4,450. 40 and the Nasdaq Composite lost 82.92 points, or 0.55 to 15,099. The three major indexes were under minimal weekly gains, but they were tracking lower for the month due to seasonally weaker trends in September.
Nasdaq's monthly losses were the lowest as investors had initially shifted to sectors more resilient to the economic disruptions from the pandemic. However, this trade could unwind over the coming weeks.
The simultaneous expiration of stock options, stock index futures and index option contracts later in the day, known as triple witching, is also expected to cause volatility during the trading session.
While the phenomenon is not new, higher volume of options trading has resulted in enhanced volatility during expiration this year and recent awareness of this dynamic has resulted in increasing visibility in upcoming transactions.
Among other movers, State Street Corp rose 5% on reports that the investment management firm was in talks to merge with peer Invesco Ltd's asset management business. State Street shares fell slightly.
Declining issues outnumbered advancers by a 1.5 - to - 1 ratio on the Nasdaq and by about a 1.2 - to - 1 ratio on the NYSE.
The S&P 500 reported 6 new highs in 52 weeks and 2 new lows, while the Nasdaq announced 51 new highs and 36 new lows.