NEW YORK — U.S. stocks on Friday pulled higher after bouts of declines in riding out an event known as quadruple witching, which tends to bring heightened volume and volatility as traders unwind positions for the quarter.
“Today the markets will be at the whim of the witches. The path of least resistance and momentum is to the upside. We’ll see how the trend stands up to expirations,” wrote Marc Pado, U.S. market strategist at Cantor Fitzgerald, in an early note.
“We have seen elevated volume all week, suggesting that there might be some powder still dry. There are no economic releases, so today’s focus will be on trading, not investing,” Pado’s note said.
Quadruple witching is a day on which contracts for stock index futures, stock index options, stock options and single stock futures all expire.
Telecommunication services fronted sector gains, while energy shares weighed, with the major stock indexes tallying weekly gains of roughly 2.5 percent.
The Dow Jones Industrial Average climbed 36.28 points, or 0.4 percent, to 9,820.2, leaving it up 2.2 percent for the week.
The S&P 500 added 2.81 points, or 0.3 percent, to 1,068.3, up 2.5 percent from the week-ago close. The Nasdaq Composite rose 6.11 points, or 0.3 percent, to 2,132.86, a level that translates into a 2.5 percent weekly gain.
Because of the expirations of options and futures contracts involving the three major stock indexes and single-stock futures, little should be drawn from Friday’s trade, said Art Hogan, chief market strategist at Jefferies & Co.
Up or down, “expirations tend to exaggerate moves,” with the direction rarely indicative of “a trend — just added volatility and volume,” Hogan said.
Historically, or about 80 percent of the time, stocks tend to retrace at least 50 percent of their expirations’ day moves the following session, regardless which direction they had been pointed, Hogan said.
The S&P 500 tends to trade poorly in the Friday-to-Friday period that follows expiration day, according to Nick Kalivas, a markets analyst at MF Global Research.
“Going back to 1987, December futures have been up only seven times, or 31.8 percent of the time. The average loss across all periods is 64 basis points.
“The average gain in the seven up years is 173 basis points, while the average loss in the 15 down years is 174 basis points,” Kalivas wrote in a research note.
