S&P 500 likely to be mired until options expire

NEW YORK (Reuters) - Sideways trading in the S&P 500 around the 1,400 level on Wednesday was likely to continue through options expiry at the end of the week, with positions in the options market expected to pin the index to that level absent other catalysts.

Despite slight incremental gains equity markets have basically been little changed for about a week as the S&P 500 hovers close to a four-year high. Light trading volumes and a lack of news from Europe have meant few catalysts for traders.

Both call and put options on the S&P 500 are clustered around the 1,400 level, meaning market-makers could pin the index at the level to maintain a market neutral position and see most of those options expire worthless on Friday.

"At 1,400 there could be the potential for a pinning action where those options ultimately expire worthless," said Todd Salamone, vice president of research at Schaeffer's Investment Research. "We have been moving sideways for the last couple of weeks around it and now with just a couple of days to go it increases the likelihood of a pin."

Economic data on Wednesday provided few catalysts for the market. The New York Fed's "Empire State" general business conditions index for August missed expectations and contracted for the first time since October 2011. Meanwhile, Labor Department data showed consumer prices were flat in July for a second straight month and the year-over-year increase was the smallest since November 2010.

Shares of Deere & Co , reflecting slowing economic growth worldwide, lost 7.7 percent to $73.97 after the world's largest agricultural equipment maker reported a lower-than-expected quarterly profit on Wednesday, citing weak sales in China, India and other emerging markets. Rival Caterpillar Inc slipped 1.1 percent to $86.89 as the biggest drag on the Dow.

The Dow Jones industrial average <.DJI> dropped 0.23 points, or 0.00 percent, to 13,171.91. The Standard & Poor's 500 Index <.SPX> rose 1.40 points, or 0.10 percent, to 1,405.33. The Nasdaq Composite Index <.IXIC> added 11.54 points, or 0.38 percent, to 3,028.52.

The S&P 500 had begun a rally early in August which sent the benchmark index to early May highs in anticipation that central banks in the United States and euro zone will take action to stimulate their respective economies in September.

But the momentum has waned recently, with the benchmark index unable to muster a move more than 0.22 percent in either direction over the past five sessions.

U.S. industrial output expanded 0.6 percent last month, the fastest pace since April and manufacturing notched another solid advance, hinting at underlying resilience in an economy that has struggled to establish momentum.

Data from the National Association of Home Builders showed homebuilder sentiment rose in August to 37, its highest level in more than five years, and above the 35 in July. The PHLX housing sector index <.HGX> fell 0.6 percent after gaining earlier.

Abercrombie & Fitch Co jumped 10.6 percent to $35.76 as the best performing S&P stock after the teen clothing retailer reported quarterly profit slightly above the forecast it issued two weeks ago and boosted its buyback plan. The S&P retail index <.RLX> advanced 0.6 percent.

In contrast, Staples Inc slumped 16.4 percent to $11.25 as the worst performer on the index after the office supply chain reported lower-than-expected quarterly revenue on weak demand in North America, Europe and Australia, and forecast flat sales for the fiscal year.

Target Corp advanced 1.9 percent to $64.57 after the discount retail chain reported a higher-than-expected quarterly profit and raised its full-year forecast.

(Editing by Kenneth Barry)

WhatsAppFacebookTwitterLinkedinBeloudBluesky