Wary Traders Stay on Sidelines; Dow Off 5.49
The stock market pulled back a bit Thursday as Wall Streeters kept a watchful eye on computer program traders.
The Dow Jones average of 30 industrials slipped 5.49 to 1,912.82, reducing its net gain so far this week to less than a point.
Volume on the New York Stock Exchange totaled 155.43 million shares, against 148.84 million on Wednesday.
For several days now, investors have been warily awaiting Friday’s session and the quarterly “triple witching hour,” which marks the last trading in a series of expiring stock-index futures, stock-index options and options on individual stocks.
On some occasions, this event has produced wide swings in stock prices as professional traders closed out positions involving both futures or options and individual stocks.
Witching Hour Nears
Because so many people are so conscious of the approaching witching hour, brokers have said, investors not involved in program trading have been reluctant to make significant commitments all this week.
As a result, the ups and downs of the market since Monday have been generally attributed to maneuvering by program traders.
As the trading session ended Thursday, analysts were still debating whether there would be more storms in the market this time, or whether the increased scrutiny of regulators had prompted participants in the game to take a more circumspect approach.
Among the day’s volume leaders, Ponderosa System jumped 2 7/8 to 28 3/8. The company reached an agreement to be acquired for $29.25 a share by an investment group led by Asher B. Edelman.
American Telephone & Telegraph fell 1 to 26 on turnover of more than 4.8 million shares. The company is taking a $3.2-billion charge against earnings, which it said would result in a loss for the fourth quarter and leave it with a small profit for the year.
International Business Machines dropped 1 3/8 to 125 3/8. The company said it sees “no signs of improvement in its general worldwide business climate as 1987 approaches.”
Bond Prices Mixed
Buffeted by speculation about developments at the OPEC talks in Switzerland, bond prices finished narrowly mixed Thursday. Short-term interest rates slipped.
Bond prices opened higher as traders speculated that no progress was being made by OPEC ministers toward reaching an accord on oil production cutbacks, said William Sullivan Jr., director of money market research for the investment firm Dean Witter Reynolds Inc.
Bond traders feel that production cutbacks would lift oil prices and contribute to higher inflation, eroding the value of fixed-income investments.
But midway through the U.S. trading day, OPEC officials scheduled a meeting of ministers for later in the day.
Sullivan said that news triggered speculation in the credit markets that “something constructive supporting higher energy prices would be forthcoming,” and bond prices gave up most of the day’s gains.
While Saudi Arabia offered a compromise plan for cutting OPEC’s oil production, cartel leaders put off a final decision with Algerian Oil Minister Belkacem Nabi saying further talks would be held Friday.
In light afternoon trading, the prices of some long-term Treasury bonds edged higher while shorter-term Treasury notes slipped.
A late-afternoon report from the Federal Reserve Board that the nation’s basic money supply fell $800 million in early December had no impact on bond prices or interest rates.
The Treasury’s 30-year issue, up almost a half-point early in the session, finished up 3/32 point for the day, according to Telerate Systems Inc. The yield on the 30-year issue was unchanged at 7.37%.
In the secondary market for Treasury securities, short-term issues fell 3/32 point, some intermediate maturities were off 3/32 point, while others were up 1/32 point and 20-year issues were up 3/32 point, Telerate said.
In corporate trading, industrials and utilities were unchanged in light dealings, according to the investment firm of Salomon Bros.
