8 Key Items Shaping the Stock Market Friday: Triple Witching Hits Amid Oil Shock

NYSE traders

These are the early headlines and other items poised to influence the market at the start of the trading day. As we share this collection of market drivers, U.S. equity futures point to a lower market open later on Friday morning.

1. Friday is the first day of spring. It is also the first “triple-witching” options expiration during what has already been a busy year for markets. Investors are bracing for what could be a doozy of a trading session. The notional value of contracts due to expire is slightly lower than the record amount that rolled off in December. Friday’s expiration tally is about $6.4 trillion, compared with more than $7 trillion in December, according to figures from SpotGamma, a provider of data and analytics for the options market. (MarketWatch) Four times a year stock-index futures, stock index options, single stock options, and single stock futures all expire on the same day — it can lead to elevated volatility and trading volumes as investors close out positions. Today just happens to be one of those days — right in the middle of the Iran war. (Barron’s)

A lot can happen on any given day in the market, and as we saw on Thursday, big moves aren’t out of the question either. However, given the current, day-to-day nature of the market, we doubt short-term traders will want to have meaningful exposure heading into a weekend that could bring U.S.-Iran developments that could be good or bad. The key for us will be to see if the S&P 500 is able to close above its 200-day moving average near 6,619.

2. The U.S. and its allies have intensified the battle to reopen the Strait of Hormuz, sending low-flying attack jets over the sea lanes to blast Iranian naval vessels and Apache helicopters to shoot down Iran’s deadly drones, American military officials said. The stepped-up operation is part of a multistage Pentagon plan to reduce the danger from Iranian armed boats, mines and cruise missiles, which have halted ship traffic through the waterway since early March. If the danger can be reduced, the U.S. could send U.S. warships through the strait and eventually escort vessels in and out of the Persian Gulf. (WSJ)

Bank of America’s view is the Strait needs to be reopened in “days, not weeks or months,” noting the conflict has already led to other potential supply chain snags. The firm noted that petrochemical factories in Asia have shut down, the Philippines is moving to a four-day work week, and Thailand is instructing workers to stay home, as well as pressure in the fertilizer and aluminum markets. Developments on this front could be part of those weekend developments mentioned above, and a move toward more ships passing through the strait has the potential to ease fears and help the market find its footing or more.

3. FedEx raised its outlook for the full year as revenue and package yields increased in the fiscal third quarter. The shipping company’s main Express segment was boosted by higher revenue per package both domestically and internationally, as well as a higher volume of packages in the U.S. It also benefited from cost cutting related to the company’s ongoing turnaround plan, as it prepares to spin off its Freight business in June. For the full year, FedEx expects revenue to grow 6% to 6.5%, up from its prior forecast of 5% to 6% growth. (WSJ)

What we found more interesting was the earnings call conversation around the topic of fuel prices and surcharges. FedEx (FDX) management shared that the company updates its fuel surcharges weekly and they are indexed to fuel prices published by the U.S. Department of Energy. While that helps FedEx protect profitability during periods of energy price volatility, it also means that over the last few weeks, it has become more expensive for those who use FedEx. Obviously, FedEx isn’t the only company that is going to do this, and the collective usage is a tailwind for inflation pressures.

4. Rising gasoline prices are already starting to bite U.S. household finances and Americans overwhelmingly expect fuel costs will keep climbing as President Donald Trump's war with Iran crimps ‌global oil supplies, a new Reuters/Ipsos poll found. Some 55% of respondents in the Tuesday-through-Thursday poll said their household finances had taken at least "somewhat" of a hit from the increases in gas prices. Among those seeing an impact, 21% said their finances were affected "a great deal." (Reuters)

Those findings signal that consumers are starting to feel the pinch of higher prices and, given the surcharge comments discussed above, odds are that more is on the way. In thinking about this, oil prices could be potentially capped near-term, but it’s still the delta compared to where they were earlier this quarter and compared to year-ago levels that will matter. As long as they remain at higher levels, some pressure will remain, and that will eat at disposable income-related spending.

5. Unilever Plc is in talks to sell its food business to McCormick & Co., in what would be the biggest overhaul of the owner of Hellmann’s mayonnaise since it was founded almost a century ago. The Anglo-Dutch consumer goods company said Friday it had received an offer from the Maryland-based spices and seasonings maker, but that there was no certainty a deal would be achieved. A sale of the food unit — which has a potential equity value of as much as €29 billion ($33 billion), according to Bloomberg Intelligence — would mark the end of Unilever competing with Big Food rivals like Kraft Heinz Co., Nestlé SA and PepsiCo Inc. It would also transform the multinational into a major household and personal care company on par with L’Oréal SA, Beiersdorf AG and Estée Lauder Cos. (Bloomberg)

We find this to be an interesting move, especially on the part of McCormick (MKC) , a company known to grow its grocery shelf space by acquisition. We’ll keep an eye on this to see if a deal is consummated, and what McCormick’s integration plan includes, as well as its timing. If consummated, it would also be another big fee for M&A bankers, and could kick off a wave of smaller deals, including potentially one for Liquid Death, a holding in SuRo Capital’s (SSSS) portfolio.

6. Nvidia will sell 1 million of its graphics processing unit chips, along with a host of the AI giant's other offerings, to Amazon.com's cloud computing unit by 2027, a Nvidia executive ‌told Reuters on Thursday. Nvidia and Amazon Web Services said this week that AWS had reached a deal to buy its 1 million GPUs but had not disclosed the precise timing of the deal. Ian Buck, vice president of hyperscale and high-performance computing at Nvidia, told Reuters on Thursday that the sales would start ⁠this year and extend through 2027. (Reuters)

Another positive development for Nvidia (NVDA) and one that points to hyperscalers looking to lock up supplies and capacity as part of their larger capital spending plans. It also supports the view we shared on Thursday when we added Applied Materials (AMAT) to the Portfolio’s Bullpen about chip capacity constraints fostering greater spending on semi-cap equipment.

On a side note, we are also reading that Amazon (AMZN) may reenter the smartphone market. We find this curious given the flop that its Fire phone was more than a decade ago, but given the array of services it has under its hood, a smartphone would complement its hardware lineup, especially as the device is increasingly a personal digital hub. The question is, would it eat away at market share from Apple (AAPL) and Samsung (SSNLF) or take it from the other 60% to 65% of the market?

7. Economic data today per TipRanks: None, but Fed Chair Powell is slated to give a speech on Saturday at 1:30 p.m. ET. Coming so soon after the Fed’s policy decision, we do not expect much in the way of fresh comments, especially given what Powell said during this week’s Fed press conference about needing to see how things play out regarding the U.S.-Iran conflict, inflation pressures and consumers.

8. Companies reporting today per TipRanks: AM – No market moving earnings announcements.

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At the time of publication, TheStreet Pro Portfolio was long AAPL, AMZN, NVDA and SSSS.