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U.S. stocks have been experiencing some of the most volatile trade in a decade and that trend is continuing Friday morning, with the three main stock-index futures up against a 5% limit-up volatility rule, a day after the S&P 500 index and the Dow Jones Industrial Average marked their worst one-day decline since the 1987 crash.
Futures for the most-active Dow Jones Industrial Average YMH20, +5.26% for March were up 5.3% at their intrasession peak Tuesday, at 22,054, while S&P 500 futures ESH20, +5.11% reached an intrasession high at 2,582, up 5.1%. Nasdaq-100 futures NQH20, +5.65% soared 5.66% to an intraday peak at 7,609.25.
On Thursday, the Dow and S&P 500 suffered their worst day since the “Black Monday” crash of Oct. 19, 1987. The Dow Jones Industrial Average DJIA, -9.99% plunged 2,352.60 points, or 10%, to end at 21,200.62. The S&P 500 SPX, -9.51% shed 9.5%, or 260.74 points, to close at 2,480.64. The Nasdaq Composite Index COMP, -9.43% tumbled 9.4%, or 750.25 points, to finish at 7,201.80.
Markets on Friday, March 13, were heartened by reports that House Speaker Nancy Pelosi, D-California and the Trump administration were near an agreement on an aid package that would include sick pay, free coronavirus testing and other resources, to help address the impact of the COVID-19 epidemic.
The U.S. stock futures volatility rule, which also took effect on Monday, is triggered when stock-index futures see a 5% swing in either direction during premarket or after-hours trading, outside U.S.’s 9:30 a.m. Eastern Time to 4 p.m. trading period, according to the CME Group’s website.
When indexes hit such levels, known as “limit up and limit down,” they aren’t allowed to move any higher or lower. Equity-index futures have different rules than other futures contracts.
If the S&P 500 index were to fall 13% on the day in the regular session once trading resumes after a 7% halt, it would trigger another 15-minute halt. Trading wouldn’t stop if the decline occurred after 3:25 p.m. A 20% drop in the S&P 500 would trigger what’s known as a level three circuit breaker, which would stop trading for the remainder of the session.
Some experts say the unpredictable and violent moves in stock benchmarks lately reflects a new regime of uncertainty fostered by the COVID-19 pandemic, the infectious disease that was first identified in Wuhan, China in December and has infected 135,000 and claimed nearly 5,000 lives, according to data compiled by Johns Hopkins University.
