Stocks fell, with a massive options event amplifying volatility and traders weighing the impacts of a strike that hit Detroit automakers while sifting through economic data before the Federal Reserve decision.

Big tech led losses Friday, with giants like Nvidia Corp. and Meta Platforms Inc. down over 3.5 per cent. The S&P 500 erased this week’s gain, while the Nasdaq 100 dropped almost 2 per cent. A gauge of chipmakers sank on a news report that Taiwan Semiconductor Manufacturing Co. has asked major suppliers to delay shipment of high-end equipment. Ford Motor Co. and General Motors Co. whipsawed. Treasury yields rose. The dollar was little changed.

Wall Street’s widely watched equity-volatility gauge — the VIX — climbed from the lowest level since 2020.

Piles of derivatives contracts tied to stocks, index options and futures expired Friday — compelling traders to roll over their existing positions or to start new ones. This time, it coincided with the rebalancing of benchmark indexes including the S&P 500, another catalyst for more share transactions. 

“Options expiration forces people to adjust their positions, and this is an especially powerful expiration that can add fuel to market moves,” said Callie Cox at eToro. “This is especially prevalent in individual stocks, where trading in the shares and options can be thin. Brace for swings, but try not to tap out of this market until we see convincing evidence of a recession.”

From a fundamental standpoint, the challenges the labor market is facing – with the United Auto Worker strike and looming government shutdown being the two biggest – are concerning for markets,” according to Mark Hackett, chief of investment research at Nationwide.

“If the strike expands, investors can expect to see an impact on the broad economy and pressure on supply chains and corporate profit margins,” he noted.

To Ian Lyngen at BMO Capital Markets, while the Fed will likely not respond to a single strike, “the overall paradigm of workers demanding persistently higher wages presents another dynamic that will keep rates higher for longer in an effort to continue to moderate labor demand.”

U.S. inflation expectations fell to the lowest in more than two years as consumers grew more optimistic about the economic outlook. Even so, sentiment fell to 67.7 — below the median estimate in a Bloomberg survey of economists. A measure of New York state factory activity unexpectedly expanded amid new orders. Production at factories barely rose in August, restrained by a drop in output of motor vehicles.

A resilient U.S. economy will prompt the Fed to pencil in one more interest-rate hike this year and stay at the peak level next year for longer than previously expected, according to economists surveyed by Bloomberg News.

Equity funds saw the biggest weekly inflow in 18 months amid growing investor confidence the U.S. economy is headed for a soft landing, according to Bank of America Corp.

Global stocks attracted US$25.3 billion in the week to Sept. 13 — the most since March 2022 — according to EPFR Global data cited by BofA. But amid the renewed optimism on the U.S. economy, strategist Michael Hartnett sees a bearish broader picture, with cash and Treasuries having attracted the bulk of inflows and both asset classes on track for a record year. 

Corporate Highlights

• Charles Schwab Corp. said it has been temporarily affected by attrition from clients as it integrates TD Ameritrade, leading to a decline in net new money for the firm last month.
• Planet Fitness Inc. announced the immediate departure of its chief executive officer, who’s held the position for more than a decade.
• Adobe Inc. provided a sales outlook that met analysts’ expectations, but disappointed investors who expected demand for the company’s artificial intelligence tools would boost revenue.
• Walt Disney Co. has now fielded at least one offer for its ABC TV network, local stations and some cable channels, and more may come as the company seeks to shed what it considers non-core assets and focus on streaming.
• Discover Financial Services is exploring the potential sale of its student-loan business as the company seeks to clean up operations in the aftermath of a series of regulatory lapses, according to people familiar with the matter.
• Grocery delivery business Instacart is preparing to price its initial public offering on Monday after boosting its price range following a strong trading debut by Arm Holdings Plc, according to people familiar with the matter.

Some of the main moves in markets:

Stocks

• The S&P 500 fell 1.2 per cent as of 4 p.m. New York time
• The Nasdaq 100 fell 1.8 per cent
• The Dow Jones Industrial Average fell 0.8 per cent
• The MSCI World index fell 0.6 per cent

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro rose 0.2 per cent to US$1.0661
• The British pound fell 0.2 per cent to US$1.2385
• The Japanese yen fell 0.3 per cent to 147.85 per dollar

Cryptocurrencies

• Bitcoin fell 0.6 per cent to US$26,414.08
• Ether fell 0.4 per cent to US$1,621.74

Bonds

• The yield on 10-year Treasuries advanced four basis points to 4.33 per cent
• Germany’s 10-year yield advanced eight basis points to 2.68 per cent
• Britain’s 10-year yield advanced eight basis points to 4.36 per cent

Commodities

• West Texas Intermediate crude rose 1 per cent to US$91.10 a barrel
• Gold futures rose 0.6 per cent to US$1,943.90 an ounce