On local time June 21st (Friday), the three major U.S. stock indices showed divergent trends. The Dow Jones Industrial Average consolidated its recent gains, while NVIDIA's continued pressure dragged down the technology sector, putting pressure on the S&P 500 and the Nasdaq. On the other hand, as Friday was the so-called "triple witching hour," with a large number of stock options, index options, and futures expiring simultaneously, it was considered one of the factors that intensified market volatility that day.

As of the market close, the Dow Jones Industrial Average rose by 15.57 points, or 0.04%, to 39,150.33; the NASDAQ Composite Index fell by 32.23 points, or 0.18%, to 17,689.36; the S&P 500 Index fell by 8.55 points, or 0.16%, to 5,464.62.

NVIDIA fell for the second consecutive trading day, closing down 3.5%, which dragged down the S&P Information Technology sector by 0.84%, leading the decline among the 11 major sectors.

For the week, the Dow Jones Industrial Average accumulated a gain of 1.47%, recording the largest weekly increase since May. The Nasdaq was essentially flat. The S&P 500 Index rose by 0.66%, marking three consecutive weeks of gains. With technology stocks under recent pressure, especially with NVIDIA's market value evaporating by $200 billion over two days, concerns arose in the market about whether other sectors could fill the gap left by the technology stocks' downturn, sparking worries about a potential peak in U.S. stocks.

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Financial Enhancement Group analyst Andrew Thrasher referred to the current market as "sellers are coming in, and the bulls are dancing on the edge of a knife." He stated that almost everything now depends on NVIDIA and Apple, and it doesn't take much to trigger a market downturn.

Bank of America analyst Vivek Arya, however, believes that NVIDIA should not be seen as a potential long-term "victim" of a pullback, stating that today's artificial intelligence boom is completely different from the internet bubble of the 1990s.

In a report, Arya said, "Unlike the 'internet boom' funded by venture capital, the deployment of generative AI is a critical mission race among some of the most well-capitalized clients."

The expiration of $5.5 trillion in options "collides" with index rebalancing.

The market's volatility in the past two trading days is also believed to be related to the so-called "triple witching hour" on Friday. According to estimates by the options platform SpotGamma, about $5.5 trillion worth of options linked to indices, stocks, and exchange-traded funds (ETFs) expired in the U.S. stock market today. This expiration date coincides with the quarterly rebalancing of the S&P 500 Index and the Dow Jones Index, and the ETFs tracking their indices will also adjust accordingly.

SpotGamma founder Brent Kochuba stated that the expiration value tied to call options this time is about 11 times the notional value of put options. Compared to the nearly 5:1 ratio in the previous quarter, this gap has widened. The widening gap indicates a growing demand for market exposure to upside risks and a shrinking demand for put options.He said that this could also cause benchmark stock indices and stocks with large trading volumes to dip slightly on Friday and early next week. Cochuba said: "Options have generally been overbought. They will start to consolidate next, and the market will become more volatile."

"The trading focus on Friday was on Nvidia call options," said Michael Green, Chief Strategist at Simplify Asset Management, "Over 7 million Nvidia option contracts were traded. This is roughly three to four times the total number of contracts traded in the market five years ago."

US June Markit Composite PMI Hits Two-Year High

On the economic data front, as employment rebounds, the US Purchasing Managers' Index (PMI) climbed to a 26-month high in June, and the easing of price pressures suggests that the recent trend of slowing inflation may continue. US existing home sales fell for the third consecutive month in May, while home prices reached new highs. The spring season, traditionally a peak sales season for the US housing market, has always been of great concern.

Data released by the National Association of Realtors (NAR) on Friday showed that existing home sales in May were at an annualized rate of 4.11 million units, a decrease of 0.7% from April.

At the same time, the inventory of existing homes increased, which is attributed to homeowners who were waiting for interest rates to drop before listing their homes for sale deciding they could no longer wait.

The housing supply on the market increased by 18.5% year-over-year to 1.28 million units, but it is still far below pre-pandemic levels.

The latest data report published by S&P Global shows that the US June Services PMI rose to 55.1, higher than the expected 53.7, indicating a robust economic performance in the second quarter.

The manufacturing PMI initial value edged up from 51.3 in May to 51.7. The services PMI initial value rose from 54.8 in May to 55.1, hitting a 26-month high.

The input prices index fell from 57.2 in May to 56.6. The output prices index fell from 54.3 in May to a five-month low of 53.5. Prices in both manufacturing and services have slowed down.S&P Global Market Intelligence Chief Business Economist Chris Williamson said: "Historical comparisons suggest that the latest decline brings the survey's price index in line with the Federal Reserve's 2% inflation target."

According to the CME's FedWatch tool, traders currently believe there is a 58% chance of a Federal Reserve rate cut in September and still expect two rate cuts this year.