Option Trades Heavy; Dow Tacks on 4.20
Stock prices drifted higher Friday as investors squared their books before the Christmas week holiday.
The Dow Jones industrial index closed up 4.20 at 2,633.66 and for the week gained 39.85. The average share gained 9 cents.
New York Stock Exchange volume was unusually heavy at 233.4 million shares, but the upturn in activity stemmed from the expiration of stock-index futures, options and individual stock options.
Volume was the heaviest since 256 million shares changed hands Dec. 6.
“A lot of it was done earlier this morning. The rest of the day was nothing,” said Donald Selkin, head of stock-index futures research at Prudential-Bache Securities.
Because of the volatility associated with the options expiration, many investors stayed on the sidelines, making for a drifting market.
“You can’t develop much of a trend on a day when it’s triple-witching coinciding with year-end window-trimming, housecleaning and portfolio building,” said Robert Stovall, president of Stovall/21st Advisers.
Among the market highlights:
* UAL rose 2 1/4 to 112 1/2 on expectations that the Department of Transportation will approve the purchase of London routes from Pan Am. The DOT said a ruling is not likely until early 1991.
* Shares of Merck & Co. rose 1 1/2 to 87 5/8 after the company said it has developed and begun human clinical testing of two compounds aimed at arresting the spread of the AIDS virus.
* Applied Power, a construction equipment company, lost 7/8 to 14 3/8 on heavy volume after it said its first-quarter earnings will be below a year ago.
* Conner Peripherals, a disk-drive company, said it knew of no reason for its stock action, which was down 1 1/4 to 22 1/8.
* Shares of Intergraph, a computer graphics company, rose one to 14 1/2. Prudential-Bache upgraded its rating to a “buy” from a “hold.”
* The stock of Ashland Oil dipped 3/8 to 28 1/8. The company said it expects a loss from operations in its first quarter because of low petroleum refining margins.
* Actively traded blue chips included AT&T;, which was up 5/8 to 31; Philip Morris, off 1/4 to 51 1/8; General Electric, ahead 1/2 to 58; Exxon, up 3/8 to 50 3/4, and American Express, off 1/2 to 21.
In London, shares rebounded after a dull morning largely on the back of Wall Street strength. The Financial Times-Stock Exchange index of 100 leading British shares closed 5.6 points higher at 2,164.4 but still registered a fall of four points since last Friday.
In Frankfurt, German shares ended narrowly mixed in quiet pre-Christmas trading, with most operators sidelined because of a combination of year-end factors and concern about the political situation in the Soviet Union and the Gulf. The 30-share DAX index rose 5.50 to 1,414.88.
In Tokyo, stocks closed down in thin trading but above their lows after a number of positive rumors floated through the market. The key 225-share Nikkei index fell 405.34 to close at 24,119.60, a loss of 229.9 on the week.
CREDIT Gulf Rhetoric Helps Depress Bond Prices A higher-than-expected federal deficit, tensions in the Middle East, and the holiday season combined to depress bond prices Friday in moderate trading.
The Treasury’s bellwether 30-year bond was down 5/8 point, or $6.25 per $1,000 in face amount, at Friday’s closing. Its yield was up to 8.29% from 8.23% late Thursday.
“We had more rhetoric coming from the Mideast situation, the holiday atmosphere and a larger-than-expected budget deficit. Put it all together, and I think it explains what happened today,” said Kevin Flanagan, a money market economist for Dean Witter Reynolds Inc.
The federal government reported a $48.1-billion deficit in November, a 62% increase over a year earlier. The government blamed the red ink on the Persian Gulf buildup and a failing economy.
Traders generally see large deficits as pushing up interest rates because the Treasury must offer attractive yields when it peddles large amounts of debt to finance government operations.
The federal funds rate, the interest on overnight loans between banks, traded at 7.25%, up from 7.125% late Thursday.
CURRENCY Dollar Fares Well in Uneven Trading
The dollar finished higher Friday on world currency markets in erratic pre-holiday trading.
In Tokyo, the dollar rose to a closing 135.70 Japanese yen from 134.58 yen at Thursday’s close. Later in London, it rose further to 135.78 yen. In New York, the dollar closed at 135.50 yen, down from 135.85 yen on Thursday.
In London, the British pound weakened to $1.8835 from $1.9080 late Thursday. In New York, it cost $1.8860 to buy one pound, cheaper than Thursday’s $1.8930.
Other late dollar rates in New York, compared to late Thursday’s rates, included: 1.5289 German marks, up from 1.5125; 1.3120 Swiss francs, up from 1.2995; 5.1955 French francs, up from 5.1425; 1,153.00 Italian lire, up from 1,139.20, and 1.1598 Canadian dollars, up from 1.1593.
COMMODITIES Silver Is Tarnished by Profit Taking Prices of silver futures fell sharply Friday on New York’s Commodity Exchange on profit taking that erased most of the gains made earlier this week. Gold and platinum futures also retreated.
On other commodity markets, soybean futures plunged; grains were mixed; orange juice futures were mixed; energy futures were mixed, and livestock and meat futures were mixed.
Silver futures ended 17.4 to 19 cents lower, with the contract for delivery in December down 17.4 cents at $4.025 an ounce.
Gold settled $2.30 to $2.70 lower on the Commodity Exchange, with December at $382.50 an ounce; platinum was $11.50 to $11.70 lower on the New York Mercantile Exchange, with January at $407.20 an ounce.
Market Roundup, D6
