Quadruple Witching Day – Markets Mixed , Awaiting Central Bank Meetings

Traders on Wall Street today faced a confluence of factors contributing to a mixed trading environment, with many sitting on the side-lines ahead of key central bank meetings.

Major U.S. equity indexes, while navigating a murky terrain of data releases and economic updates, and down on the day, are still poised for advances over the week. Uncertainty looms heavy as the Federal Open Market Committee (FOMC) and the Bank of Japan (BoJ) prepare for their highly anticipated policy discussions next week.

Quadruple witching – the synchronous expiration of stock index futures, stock index options, stock options, and single stock futures – added an extra layer of complexity to today's session, potentially heightening market volatility.

In an early sign of strength, the S&P 500, Dow Jones Industrial Average, and the tech-heavy Nasdaq-100 index futures pointed modestly upward before the opening bell, suggesting a degree of optimism as investors digested a mixed bag of economic data. Retail Sales, a key indicator of consumer health, rose by 0.6% in February, instilling confidence in the resilience of consumer spending amidst concerns over inflation and rising borrowing costs.

However, this optimism was tempered by a report from the New York Fed indicating that the Empire State Manufacturing Index plunged to –20.9 in March, signalling a contraction that was worse than expected. Further adding to the mixed economic picture, February's U.S. import price data showed a smaller rise than the previous month, potentially allaying some concerns over persistent inflation.

Global central banks have kept the markets on edge, with the Federal Reserve poised to leave rates unchanged, according to widespread expectations. Yet, eyes will be on the fresh economic and rate projections set to be released with the decision. Contrastingly, the BoJ is expected to take a historic step away from its negative interest rate policy, exemplifying the broader shift in global monetary policy.

Within tech stocks, the performance has been varied in the trading session so far, with Adobe’s shares falling heavily (down more than 13%) after earnings fell short of Wall Street’s forecasts. Meanwhile, shares of Nvidia (+1%), Microsoft (-2%), and Netflix (flat) depicted no clear trend.

Market sentiment had already taken a hit on Thursday when the Producer Price Index (PPI) surpassed expectations, stoking inflation worries which saw both the S&P 500 and Nasdaq Composite concluding the day lower.

Quadruple witching day is normally one that pulls out some erratic individual displays, but more than an hour into the session the note of the day is in Merck where a bullish option flow has been detected (5,757 calls trading, and implied volatility almost 2 points up at 23.60%). Shares in Merck (NYSE: MRK) are down 2.2% on the week so far, but trading in the green 0.5% through the morning.