Constellation Energy, Nike, Sinclair And Other Big Stocks Moving Higher On Friday

In a closely watched decision this past Wednesday, the Federal Reserve opted for a bigger-than-usual 50-basis point rate cut. While rate cuts of that size are typically reserved for periods of economic crisis, Fed Chair Jerome Powell attempted to thread the needle in his accompanying commentary, positioning the dramatic cut as a recalibration of central bank policy as the group shifts its focus from the fight against inflation toward the recently softening labor market.

Moreover, the central bank's forecasts indicated that further cuts are in the pipeline, with two more traditional cuts of 25 bps each expected at the final two meetings of 2024, and additional easing projected into 2025 and 2026.

After a mixed initial reaction, the decision sent stock markets soaring to new records on Thursday, as investors priced in fresh expectations for a “soft landing.” As the initial euphoria fades, though, this represents an opportune time for investors to consider picking up shares of dividend stocks, small-cap stocks and utility stocks - all of which should benefit from lower interest rates over the long term.

However, sifting through thousands of listed stocks to try and identify the best investments can be a daunting task. To tackle this problem, here are three popular exchange-traded funds (ETFs) that offer broad exposure to each of these themes.

#1. Vanguard Dividend Appreciation ETF

The Vanguard Dividend Appreciation ETF was established back in April 2006. It's part of the Vanguard Group, a leading investment management company founded in 1975 by John Bogle.

VIG is designed to track the performance of the Dividend Appreciation Index, which consists of common stocks of companies that have a record of increasing their dividends. The ETF aims to provide investors with a way to invest in companies that have a history of consistent dividend growth. VIG currently has a sizeable AUM of about $86.3 billion.

Up 15.6% on a YTD basis, the VIG ETF offers a forward dividend yield of 1.71%, backed by a 5-year growth rate of over 10%.

The S&P 500 Index today is down by -0.33%, the Dow Jones Industrials Index is down by -0.11%, and the Nasdaq 100 Index is down by -0.48%.

Stocks today are moderately lower, giving back some of Thursday’s sharp gains. Higher bond yields today are also dragging interest-rate-sensitive chip stocks lower. Stocks are also under pressure today from some negative corporate news. FedEx is down more than -15% after reporting Q1 adjusted EPS well below the consensus and cutting its 2025 adjusted EPS forecast. Lennar is down more than -4% after reporting weaker-than-expected Q3 net new orders. A +6% jump in Nike today limits losses in the Dow Jones Industrials.

Market volatility today may be higher than usual due to the quarterly episode known as “triple witching,” when derivatives contracts tied to stocks, index options, and futures expire, potentially amplifying market moves. According to analytical firm Asym 500, about $5.1 trillion of contracts are set to expire today. The expiry today also coincides with the rebalancing of benchmark indexes. The event has a reputation for causing sudden price moves as contracts disappear and traders roll over their existing positions or start new ones.

The markets are discounting the chances at 100% for a -25 bp rate cut at the November 6-7 FOMC meeting and at 41% for a -50 bp rate cut at that meeting.

Overseas stock markets today are mixed. The Euro Stoxx 50 is down -1.26%. China's Shanghai Composite closed up +0.03%. Japan's Nikkei Stock 225 rose to a 2-week high and closed up +1.53%.

Interest Rates

December 10-year T-notes (ZNZ24) today are down -4 ticks. The 10-year T-note yield is up +4.3 bp to 3.757%. Dec T-notes today are posting moderate losses on negative carryover from weakness in European government bonds. Also, supply pressures are weighing on T-notes as the Treasury will auction $183 billion of T-notes next week, beginning with Tuesday’s $60 billion auction of 2-year T-notes. Losses in T-notes are limited as weakness in stocks has boosted some safe-haven demand for T-notes.

European government bond yields today are moving higher. The 10-year German bund yield rose to a 1-1/2 week high of 2.219% and is up +2.0 bp at 2.218%. The 10-year UK gilt yield climbed to a 1-1/2 week high of 3.914% and is up +2.1 bp at 3.913%.

The Eurozone Sep consumer confidence index rose +0.5 to a 2-1/2 year high of -12.9, stronger than expectations of -13.2.

German Aug PPI rose +0.2% m/m and fell -0.8% y/y, stronger than expectations of unchanged m/m and -1.0% y/y.

ECB Governing Council member Rehn said the ECB has "a clearly easing direction for its monetary policy, with the pace and scope dependent on fresh economic data and analysis."

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 24% for the October 17 meeting.

US Stock Movers

FedEx is down more than -15% to lead losers in the S&P 500 after reporting Q1 adjusted EPS of $3.60, well below the consensus of $4.77, and cutting its 2025 adjusted EPS forecast to $20.00-$21.00 from a previous forecast of $20.00-$22.00, the midpoint weaker than the consensus of $20.53. United Parcel Service is also down more than -3% on the news.

Semiconductor stocks are under pressure today to weigh on the overall market. ON Semiconductor is down more than -5% to lead losers in the Nasdaq 100. Also, GlobalFoundries , Microchip Technology , Analog Devices , Lam Research , and NXP Semiconductors are down more than -3%. In addition, Texas Instruments , Marvell Technology , Applied Materials , and KLA Corp are down more than -2%.

Apellis Pharmaceuticals is down more than -9% after the European Medicines Agency upheld its negative opinion on the marketing authorization for the company’s Syfovre eye drug.

Frontline Plc is down more than -6% after SEB Equities double-downgraded the stock to sell from buy with a price target of $19.05.

Lennar is down more than -4% after reporting Q3 net new orders of 20,587, below the consensus of 20,827.

PBF Energy is down more than -5% after Piper Sandler downgraded the stock to underweight from neutral with a price target of $25.

Valero Energy is down more than -3% after Piper Sandler downgraded the stock to neutral from overweight.

PepsiCo is down more than -1% after Morgan Stanley downgraded the stock to equal weight from overweight.

Nike is up more than +6% to lead gainers in the Dow Jones Industrials after announcing that Elliot Hill will return to the company as CEO and president effective October 14, a move analysts said was positive as Hill is an industry and company veteran.

GE Vernova is up more than +2% after Jeffries raised its price target on the stock to $293 from $261.

Exelon is up more than +3% after Jeffries initiated coverage on the stock with a buy recommendation and a price target of $46.

Assembly Biosciences is up more than +4% after Jeffries upgraded the stock to buy from hold with a price target of $35.

Ameren Corp is up more than +1% after Jeffries initiated coverage on the stock with a buy recommendation and a price target of $97.

Campbell Soup is up more than +1% after Argus Research upgraded the stock to buy from hold with a price target of $59.

Earnings Reports (9/20/2024)

Golden Matrix Group Inc (GMGI).

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policyhere.

CC Lagator, co-founder of Options AI, shared his insights on the Friday’s episode of Benzinga’s PreMarket Prep, cautioning traders to prepare for increased volatility in the week following September’s “triple witching.”

Hosted by Aaron Bry and Dennis Dick, the discussion highlighted how the massive expiration of key options contracts can drive unusual market activity and set the stage for turbulence ahead.

Triple witching, which occurs quarterly on the third Friday of March, June, September, and December, is when stock index futures, stock index options, and individual stock options expire simultaneously.

This event often creates market turbulence, as traders scramble to close, roll over, or offset expiring contracts.

Over $5 trillion in notional options, including $605 billion in single-stock options, are expected to expire during Friday's session.

Historically, triple witching has led to increased volatility and unusual price movements. The S&P 500, tracked by the SPDR S&P 500 ETF Trust , closed in the red on the last three triple witching days:

• June 21, 2024: S&P 500 fell by 0.5%.
• March 15, 2024: S&P 500 dropped by 1%.
• Dec. 15, 2023: S&P 500 declined by 0.6%.

Historical Weakness Post-Witching Week

During his appearance on Benzinga PreMarket Prep, CC Lagator explained how the convergence of expiring options impacts the market.

“You might see some imbalances that you wouldn’t have seen on a normal day at the open,” CC Lagator said, highlighting how trading activity starts to unwind a couple of days before but accelerates toward the close of the session.

This often stems from big hedge funds and mutual funds rolling options positions into the next month, which can lead to increased volatility. He further noted that the market environment shifts drastically after triple witching, with traders facing a completely new landscape in the following week.

“Next week historically is a terrible week going back decades,” Lagator said, noting that the week after triple witching in September has rarely shown positive returns over the last 30 years.

With volatility expected to pick up, he cautioned that traders should brace for a challenging week due to the impact of unwinding positions on the broader market.

The conversation also turned to the Volatility Index (VIX), often referred to as the “fear gauge,” which CC Lagator described as being relatively low and attractive for call option buyers at these levels.

“The VIX is at 16 right now, it’s not high,” CC Lagator stated, adding that it trades below its long-term average of 19.

“If this was July and we were at all-time highs, the VIX would probably be 13,” he noted, attributing the slight uptick to recent market events and the seasonal volatility that accompanies the fall months.

“For traders looking at the next month and a half, there’s not much worry about volatility dropping much lower than where it is now,” Lagator predicted, adding that “we're probably not seeing it hit 12 until Christmas.”

Lagator advised that traders could use this period of low volatility to their advantage when considering options positions.

“If you were buying at-the-money options right now, you probably don’t have much to worry about in terms of volatility going much lower,” he said, emphasizing the stability of current volatility levels as a potential buying opportunity for those seeking to hedge or position themselves for a breakout.

A similar view has also been shared by Goldman Sachs, which estimates that, given macroeconomic conditions, the VIX should be at 24.5 points.

The investment bank issued a recommendation for investors to hedge their portfolios using VIX calls. Specifically, Goldman Sachs analysts advise buying CBOE Volatility Index (VIX) November calls at a strike price of 18.

S&P 500’s 5 Top Gainers, 5 Worst Laggards After Friday’s Market Open

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