Expiration of Options Gives Stocks a Boost

Stocks moved higher Friday after getting a late boost from options expirations, and bond yields edged upward, forcing prices down in a bout of profit taking.

The dollar slid against most major currencies.

In a day marked by little investor interest, the Dow Jones industrial average rose 14.56 points to 3,753.81, ending 44.67 higher for the week.

Advancing issues outnumbered decliners by about 11 to 8 on the New York Stock Exchange, with 275.86 million shares changing hands, down from Thursday’s 322.33 million.

Computer problems caused the Nasdaq trading system to delay opening until shortly before noon, causing difficulties for index traders who were trying to square positions ahead of the options expiration. The Nasdaq index of mostly smaller companies fell 0.20 to 721.36.

The Nasdaq problems added to the normal volatility associated with options expirations. Both made it difficult for traders to discern whether the market can extend Thursday’s gains, when the Dow rose 34 points following a sharp gain in bond prices and a recovery in the dollar.

“I don’t think the rally’s over, but it makes you question whether it’s going to be broad-based,” said Ralph Acampora, director of technical research at Prudential Securities.

The Dow fell 8 points at the opening but then moved into positive territory along with bonds, which advanced in reaction to a report that business inventories rose a larger-than-expected 1.1% in May.

Analysts concluded that larger inventories could put a downward pressure on future manufacturing activity, which could slow the economy and head off inflation.

The week’s rally in the Treasury market fizzled, with bond prices giving up early gains despite the signs of slower economic growth.

For the fourth day this week, the government released figures indicating the economy lost steam in the second quarter.

The accumulation of news helped spur further bond buying in early trading, leading to modest price gains after a 1 3/8-point rally Thursday.

But by day’s end, the long bond’s yield edged up 7.54% from 7.53% on Thursday. Its price, which moves in the opposite direction, was down 3/32 point, or 94 cents per $1,000 in face value.

Prices of shorter-term maturities ended mixed.

Meanwhile, the dollar drifted lower against the Japanese yen but was little changed against the German mark.

In New York, the dollar slipped to 97.85 Japanese yen, down from 98.60 on Thursday. The dollar also slipped to 1.554 German marks from 1.555.

Among the market highlights:

* Texas Instruments tumbled 6 1/8 to 80 1/4 after saying it expected semiconductor growth to moderate in the second half. The company reported second-quarter earnings of $1.93 a share.

Other chip stocks slipped, with Intel down 2 to 59 1/2, Motorola off 1 3/8 to 48 7/8 and LSI Logic off 1 3/8 to 27. IBM declined 1 3/8 to 56 7/8, Altera fell 6 1/2 to 25 1/2 and Apple lost 3/8 to 28 1/4.

* Altera said it expects revenue growth in the third quarter to be less than what analysts had predicted. Shares in the programmable logic devices company fell 6 1/2 to 25 1/2.

* Three-Five Systems, which makes LED and LCD display systems, jumped 6 1/4 to 37 5/8.

* Bankers Trust New York dipped 1 1/4 to 65 3/8. Merrill Lynch downgraded its near-term rating on the stock.

* Eli Lilly slipped 1/8 to 50 1/2. The drug maker, which has agreed to buy McKesson’s PCS prescription benefits company, said its second-quarter net earnings rose to $1.20 a share, including a $10-million charge, from $1.18 a year ago.

Frankfurt’s 30-share DAX average ended up 37.99 points at 2,093.61, while London’s Financial Times 100-share average closed at 3,074.8, up 24.4 points on the day for a rise of 112.4 from last Friday.

In Tokyo, the 225-share Nikkei ended 52.11 points higher at 20,770.15, and Mexico City’s Bolsa index was down 1.55 points at 2,281.23.

Market Roundup, D3