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September 20, 2019

Dow opens higher, but remains on track to finish the week down

Stocks are climbing higher on Friday, but it's still on pace to finish the week lower.

The economic calendar is light, European markets are up and most of Asia closed higher. Investors are keeping an eye on developments on the US-China trade front.

Washington has excluded more items from the import tariffs on Chinese goods, according to notices from the US Trade Representative.

The Dow is about 45 points higher, or 0.2%, while the S&P 500 is up 0.3%. The Nasdaq Composite is up 0.1%.

The 10-year US Treasury bond yield is slightly lower at 1.768%. The US dollar, measured by the ICE US Dollar Index, is up 0.3%.

One issue that has "captured the market's attention this week is not so much the second Fed cut this year and the prospects for a third, but the disruption with the plumbing," said Marc Chandler, chief market strategist at Bannockburn Global Forex, in a note to clients.

The New York Fed embarked on its fourth repo operation in a row Friday to inject liquidity into overnight lending markets for the weekend ahead. Between Tuesday and Friday, the regional central bank injected $278 billion in the market.

These markets experienced a liquidity squeeze earlier this week, thanks to an oversupply of Treasuries and a lack of money to be put to work as companies were due to pay their quarterly tax bills.

"Precisely how the Fed addresses it, such as a standing repo facility or allowing the balance sheet to expand organically like it did through most of its history, is not yet clear, though we suspect a combination of measures will be taken," Chandler said.

Quadruple witching

Friday also marks what is known as quadruple witching, the simultaneous expiration of futures and options on stocks and indexes.

Expiring contracts like that can spur volatility in the market and lead to higher trading volumes.

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