US stock markets opened in the red at a time of heightened caution, despite easing interest rates on 10-year US bonds.
The Dow Jones is still down 0.74%, to settle at 32,613.40 points. Yesterday, although it closed down, it set a new all-time high at 33,227.78 points.
The Standard & Poor’s 500 fell 0.49% to 3,896.36 points. The day before yesterday it set a new record in intraday trading, when it touched 3,983.87 points.
On the other hand, the Nasdaq Composite lost 0.20%, closing at 13 089.50 points.
The Nasdaq opened slightly up, but it was a short-lived rebound. Yesterday, it was the index most punished, closing down more than 3%.
The fact that yields on 10-year Treasury bonds in the US are easing helps improve investor sentiment, but this is a session in which volatility is expected to be high due to quadruple witching in the European and US markets. And quadruple witching because there are four contracts maturing simultaneously: stock index futures and options, and stock futures and options in both the US and Europe. The name of the day thus refers to these four maturities and to witches.
The markets have the term ‘witching hour’ which is the last trading hour of the stock market session. Since the expiration of these four types of contracts has a great influence on market performance, the term is taken as appropriate for the situation, since this ‘witching hour’ will be a short period when those who practice witchcraft become especially active and powerful.
As such, it is a historically more volatile day, especially in the last hour of trading, with a high volume of transactions. This is because investors who need to close positions can move the market at any price, causing prices to swing erratically.
Quadruple witching occurs four times a year, on the third Friday of March, June, September and December.
