September 21, 2018 / 9:16 PM / 8 months ago

Wall St Week Ahead-Volume spikes on sector reshuffle, quadruple witching

 (Updates with volume at Friday's closing volume, stock moves)
    By Chuck Mikolajczak and Caroline Valetkevitch
    NEW YORK, Sept 21 (Reuters) - An overhaul of Wall Street's
technology and media sectors coincided with the quarterly
expiration of futures and options, bringing a burst of volume to
trading late on Friday that could continue in the days that
    After the close on Friday, S&P Dow Jones Indices was poised
to reorganize several of its sectors and relaunch its
telecommunications index as a new communication services sector.
    About 10.87 billion shares changed hands on U.S. exchanges
on Friday, the highest volume since Feb. 9 and one of the
highest-volume sessions of the year, according to Thomson
Reuters. A big chunk of the volume came in the last 15 minutes
of the session.
    Of the S&P technology sector's 10 biggest
percentage decliners of the day on Friday, three were companies
that are joining the new communication sector. Twitter
was the biggest loser, with a 4.5 percent drop, while Facebook
 was the fourth-biggest decliner, with a 1.9 percent drop,
and Alphabet saw the seventh-biggest loss, with a 1.6
percent drop. 
    The reorganization by S&P and MSCI of the Global Industry
Classification Standard involves S&P 500 heavyweights like
Facebook Inc, Netflix Inc and Alphabet Inc, and
drastically alters the weightings of some sectors.

    The telecom sector, currently about 2 percent of
the entire S&P 500, is expected to have a roughly 11 percent
weighting under its new communication services tag. Technology,
with a roughly 26 percent weighting, is expected to fall to
about 20 percent. Consumer discretionary is likely to drop from
13 percent to about 11 percent.   
    On top of the index reshuffling and "quadruple witching"
expirations, S&P also is implementing the quarterly rebalancing
of its indexes.
    Among the most active stocks on the New York Stock Exchange
and Nasdaq on Friday were AT&T, Verizon Communications
 and Facebook, all of which will be in the new
communication services sector.
    EBay, also in the top 25 most active stocks on the
Nasdaq on Friday, is being moved from the technology into the
consumer discretionary sector, which will result in fund
managers needing to buy more than 2.7 million shares in the
online marketplace, according to ITG.
    "The assets associated with the information technology ETF
are greater, so this is actually a net positive for eBay in that
fund managers will have to buy more shares than they will have
to sell," said Ivan Cajic, head of index research at ITG in New
    "It will be a net positive demand for eBay." 
    Apple will remain in the tech sector but will see
its share float fall about 5 percent due to Berkshire Hathaway's
 growing position in the iPhone maker. ITG expects fund
managers will need to sell more than 39 million shares due to
the smaller float. 
    Some strategists expect the sector changes to cause little
disruption to the market because money managers have had a long
time to prepare. S&P Dow Jones Indices announced the overhaul in
November 2017.
    "It has been well, well publicized that they were doing
this, so it should not create all kinds of drama," said Ken
Polcari, director of the NYSE floor division at O’Neil
Securities in New York. 
    Others said reshuffling by exchange-traded funds (ETFs) that
are actively managed may result in higher volatility in the
short term as managers rotate money to new areas. 
    Those in charge of actively managed funds could be adjusting
positions for weeks following the sector changes, said Steven
DeSanctis, equity strategist at Jefferies in New York.
    "At the end of the day, large-cap growth managers are going
to be really overweight communication services," he said. 
    "That has some potential to cause some interesting swings
over the next several weeks," DeSanctis said. "A lot of
investment managers try to keep their sector weights within a
certain boundary plus or minus a couple of hundred basis

 (Additional reporting by Trevor Hunnicutt and Sinéad Carew;
Editing by Alden Bentley and Meredith Mazzilli)
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