MONEY stocks

Friday the 13th Is a Lucky Day for Stocks, But Beware Next Friday

061413_INV_Jason_1
History says it's unlikely that Jason will come after investors on Friday the 13th. Ronald Grant—Everett Collection

Historically, it’s so-called “Triple Witching” day, which comes next Friday, that really spooks the markets.

Calm down. Take a deep breath. Sure, the S&P 500 has suffered three straight down days. And today, Friday the 13th, is supposed to be the scariest day of the year.

But the stock market is by nature counterintuitive. Friday the 13th, as luck would have it, turns out to be a decent day to invest in equities: Since 1950, returns on Fridays the 13th have averaged 0.88%, more than twice the 0.34% average gain of trading days in general. And “the frequency of advance” is higher on Friday the 13th than on other days, says Sam Stovall, managing director for U.S. equity strategy at S&P Capital IQ. In other words, there’s a greater chance that the S&P 500 will post a positive gain on Friday the 13th (56%) than other days (52%).

That doesn’t mean today’s market performance will match the average, of course, or that the average will hold in the future. But the fact is, as Jeffrey Hirsch, editor in chief of The Stock Trader’s Almanac, has put it, “Friday the 13th has been erroneously associated with market crashes.”

In fact, there’s been only one significantly bad Friday the 13th in recent market history. That was October 13, 1989, the day of the so-called mini crash of ’89, when the S&P 500 lost around 6.1% of its value and the Dow Jones industrial average fell around 190 points (which back then amounted to a 6.9% drop). The losses were triggered in part by a crisis in the junk bond market.

On the other had, there’s actually good reason to be freaked out about next Friday, which is a so-called Triple Witching day on which contracts for stock options, index futures, and index options expire simultaneously. Four times a year, on the third Friday of March, June, September, and December, investors are forced to decide whether to roll over those contracts into new ones or to unwind their positions. As a result, on those days, and especially during the final hour of trading on those days, volatility tends to spike.

Even worse, in the week that follows each June’s Triple Witching Day, the Dow has lost ground in 21 of the past 24 years. Says Hirsh: “The weeks after Triple-Witching Day are horrendous.”

MONEY stocks

WATCH: Apple Splits Stock Seven Ways

Why did Apple do a 7:1 stock split? Maybe it's because the tech giant wants a spot on the Dow Jones Industrial Average.

TIME Markets

Markets Rally on News From the Fed

A transcript of the Federal Reserve’s last session quelled fears among investors that the central bank could soon raise interest rates

Stocks in the United States climbed Wednesday, building on recent gains as investors were reassured that the Federal Reserve won’t be raising interest rates any time soon. Policymakers agreed to scrap an a trigger that would have raised interest rates if unemployment fell to a certain point.

The Dow Jones Industrial Average rose 181.04 points to close at 16,437.18, for a gain of 1.11%. The S&P 500 climbed 20.22 points to 1,872.18 while the NASDAQ rocketed 70.91 points, or 1.72%, to close at 4,183.90.

More than two stocks increased in price for every one that dropped in the New York Stock Exchange, CNBC reports. The Nasdaq climbed into the positive for the year, reversing losses from his worst three-day performance since 2011.

[CNBC]

Your browser, Internet Explorer 8 or below, is out of date. It has known security flaws and may not display all features of this and other websites.

Learn how to update your browser