Dow Loses 0.45 in Erratic Trading : Market Overview
* Stocks ended with moderate losses after an erratic day of price swings pushed by expiring options and some profit taking.
The Dow Jones industrial average edged down 0.45 point to 3,280.19. For the week, the Dow was up 34.22 points.
* Treasury bond yields rose as investors again showed concern about the market’s ability to absorb new debt issues.
Stocks
Stocks were buffeted by the day’s “double-witching” options expiration. Traders who play various short-term trading games using options are forced to close out their positions on expiration day, and that can lead to heavy buying or selling of the stocks underlying the option contracts.
The Dow, up 50.32 points on Thursday, was off as much as 28 points during trading Friday before buying closed the deficit toward the end of the day.
In the broader market, declining issues outnumbered advances by about 4 to 3 on the New York Stock Exchange. Volume slipped to 260.36 million shares from Thursday’s 270.55 million.
Among smaller stocks, the NASDAQ composite index fell 2.48 points to 629.75, after rocketing 9.82 points on Thursday.
Analysts said the Dow’s record close on Thursday--when it hit 3,280.64--caused some selling by profit takers on Friday.
But many experts say the market’s continued resilience shows that many investors are betting on an economic recovery later this year. It’s difficult to predict what might change those buyers’ minds, analysts say.
Bruce Bittles, analyst at J. C. Bradford, said, “The tone and feel of the tape says it’s going to go higher.”
Among the market highlights:
* Within the Dow, losers included Merck, off 1 to 146 1/4; J. P. Morgan, down 2 to 58 1/2, and Caterpillar, off 1 1/2 to 50 3/4. Also, Chevron tumbled 1 3/4 to 60 3/4, a 52-week low, as oil stocks continued to slide.
* Some industrial stocks that have soared recently on economic-recovery hopes were hit by profit taking. Cummins Engine lost 2 5/8 to 62 1/4, Ford dropped 1 1/8 to 37 1/2, metals firm Amax slid 1 5/8 to 20, and RV maker Fleetwood Enterprises skidded 1 5/8 to 40 7/8.
* Some technology stocks were strong. Intel gained 1 3/4 to 67 3/4, Digital Equipment rose 2 to 62 1/4, and Lotus was up 3/4 to 33. But Unisys dropped 3/4 to 9 5/8 on worries about whether the computer giant’s turnaround is real.
* Entertainment issues were generally higher. CBS rose 6 1/4 to 162 1/4, apparently helped by expectations that ad revenues will strengthen if the economy rebounds. Also, Turner Broadcasting Class A shares leaped 2 3/8 to 24 1/2 after a strong earnings report.
Meanwhile, Time Warner rose 1 7/8 to 99 3/4. Smith Barney and Oppenheimer & Co. repeated buy ratings on the media giant, saying co-Chief Executive and President Nicholas Nicholas’ resignation Thursday was positive for the company.
* Apparel maker Warnaco soared 3 1/2 to 35 3/4. Standard & Poor’s said it may upgrade the company’s debt, citing Warnaco’s plans to refinance some of its junk bonds at lower interest rates.
* Ohio Art leaped 18 1/2 to 50 1/2. The toy company--which makes the Etch a Sketch--posted strong fourth-quarter net income of $4.07 a share Thursday, compared to 57 cents a share a year earlier.
Overseas, stocks closed sharply higher in Tokyo and Frankfurt, but lower in London. Japan’s Nikkei average was 519.89 points higher for the day at 21,291.81. In Frankfurt, the DAX average rose 14.45 points to 1,717.63. London’s Financial Times 100-share average slipped 1.1 points to 2,542.3.
Credit
The price of the Treasury’s key 30-year bond fell 7/16 point, or about $2.19 per $1,000. The bond’s yield, which moves in the opposite direction from price, rose to 7.94% from 7.91% Thursday.
A pressing concern to bond traders is upcoming auctions of new Treasury bonds and notes, which will help fund the government’s huge budget deficit. Increased supplies of securities can temporarily depress prices until the market absorbs the new issues.
“This is a market that is drowning in supply and is not going to change until the supply problem is behind it,” said Anthony Chan, a senior economist at Barclays de Zoete Wedd
Securities.
The federal funds rate, the interest on overnight loans between banks, was quoted at 3.75%, down from 4% late Thursday.
Currency
Israeli military clashes in southern Lebanon, economic problems in Germany and rising interest rates in the U.S. combined to boost the dollar against major foreign currencies on Friday.
Analysts said battles between the Israeli military and Palestinian forces in southern Lebanon fostered anxiety among currency traders, causing some to buy dollars as a safe-haven investment.
Germany’s continuing troubles with reunification hurt the mark, analysts said. Labor talks between Germany’s banks and workers are being closely watched because of a threatened strike.
The dollar was quoted at 1.659 German marks in late New York trading, up from 1.645 Thursday. The dollar also rose to 128.95 Japanese yen from 128.60.
Commodities
Coffee futures skidded lower, falling on signs that some exporters have given up hope for a rebound in prices.
It was a down day on most U.S. commodities markets. Precious metals, oil, livestock and grain futures all ended lower.
Unroasted coffee for March dropped 2.40 cents on New York’s Coffee, Sugar & Cocoa Exchange to 66.80 cents a pound, one notch above Tuesday’s settlement of 66.70, the lowest near-term coffee price since the summer of 1975.
Much of the selling came from exporters in Brazil and other coffee-producing countries that apparently sold futures to lock in prices as insurance against further declines, according to Melissa Trout, coffee market analyst with Cargill Investor Services Inc. in New York.
Gold and silver futures fell moderately on New York’s Commodity Exchange as the general weakness in commodity prices discouraged investors from holding precious metals as a hedge against inflation.
Gold for February delivery fell $2 to $351.20 an ounce; March silver slipped 2.5 cents to $4.10.
Light, sweet crude oil for April delivery fell 8 cents to $18.66 a barrel on the New York Mercantile Exchange, wrapping up a week that saw crude take its biggest one-day plunge since the Gulf War.
Market Roundup, D6
