‘Triple Witching Hour’ Spurs Late Buying; Dow Jumps 23.68
Blue-chip stocks rose sharply just before the close of a jumpy session Friday as another “triple witching hour” of expiring options and futures went into the books on Wall Street.
The Dow Jones average of 30 industrials jumped 23.68 to 1,879.54, its highest close since it stood at a record 1,885.90 two weeks ago. For the week, the Dow posted a gain of 5.35 points. But declining issues outnumbered advances by about eight to seven on the New York Stock Exchange.
For most of the day, analysts said most investors were proceeding cautiously in advance of the witching hour at the close. This quarterly phenomenon comes with the last trading of an expiring set of futures contracts on stock indexes, options on stock indexes and options on individual stocks.
Has Caused Wide Swings
Frequently in the past, the witching hour has brought wide swings in the market as professional traders who were engaged in multiple program strategies bought or sold big baskets of stocks in the course of closing out their positions. As it worked out Friday, program trading or the expectation of it touched off a rush of buying in blue chips just before the close.
In the economic news, the Labor Department reported a 0.2% rise in the consumer price index for May. It was the first increase in the index since January, but it came as no surprise on Wall Street. Indeed, some observers had been looking for a slightly higher figure.
In any case, analysts said most market participants were preoccupied with the last-minute program trading activity and paid little heed to general economic news.
Some individual stocks, however, showed lively responses to specific developments.
Dart & Kraft led the NYSE active list, up 4 at 64 3/8 on turnover of more than 3.7 million shares. The company plans to split into two separate entities in a move it said is intended to increase shareholder value.
U.S. Tobacco jumped 4 to 40. A jury ruled in favor of the company in a product-liability suit concerning smokeless tobacco.
Other tobacco stocks also rose on the verdict, which was the latest of a series of decisions in favor of the industry in liability cases. RJR Nabisco gained 2 1/2 to 51 1/2 and Philip Morris 2 1/2 at 69 7/8.
Big Board Volume Climbs
Elsewhere, gainers among the blue chips included International Business Machines, up 2 1/2 at 147 1/2; General Electric, up 3/4 at 81, and McDonald’s, up 3/4 at 102 1/2.
Volume on the Big Board came to 149.14 million shares, up from 128.98 million Thursday.
In the bond market, some actively traded long-term government issues moved up strongly, more than recouping Thursday’s price losses, but the rally still left them only about at their week-earlier levels. Shorter-term government maturities posted more moderate gains.
Dealers took comfort in the Labor Department’s report showing that inflation was not resurging as sharply as some had feared. An acceleration in price increases could hamstring the Fed, forcing it to rule out any easing in credit conditions, some analysts say.
The Treasury’s 30-year bond rose nearly a full point, or almost $10 for each $1,000 in face amount.
That cut the key bond’s yield to 7.45% from 7.53% late Thursday.
The federal funds rate, the interest on overnight loans between banks, traded at 6.75%, compared to 6.875% late Thursday.