FINANCIAL MARKETS : ‘Witching Hour’ Fuels Record NYSE Volume; Techs Fall Again
The U.S. stock market closed broadly but modestly lower Friday on a record volume day for the New York Stock Exchange, swelled by options- and futures-related trading.
Technology stocks tumbled for a second session, but their decline was largely offset by buying of shares in less-volatile industries.
The Dow Jones industrial average eased 5.42 points to 5,176.73 as NYSE volume rocketed to 653.2 million shares--finally surpassing the record of 608.2 million that has stood since Oct. 20, 1987, the day after the great market crash.
The unprecedented volume was tied to the so-called triple-witching quarterly expiration of individual stock options, stock index options and index futures.
Four times a year, those expirations force investors who have engaged in technical trading strategies involving stocks and options or futures to either close out their positions or roll them over.
The result generally is extraordinarily heavy computerized trading, though movements in individual stocks may or may not be large as buyers and sellers cancel each other out.
More than 279 million shares traded in the first hour, passing the previous record of 213 million. “I’m so busy I can’t even see straight,” said Bill Beise, a trader at Wessels, Arnold & Henderson in Minneapolis. “It’s great to be so busy.”
By the end of the day, NYSE losers had a slight edge over winners, but on balance the average stock lost little ground. The Standard & Poor’s 500 index slipped 0.58 point to 616.34.
The Nasdaq market also was busy, reporting its second-heaviest-ever volume of 581.8 million shares, short of the record 597.5 million of July 19, 1995.
The Nasdaq composite index sank 7.71 points to 1,030.48, weighed down for a second day by renewed selling of technology shares on fears that computer sales are slowing significantly.
Meanwhile, in the bond market, yields inched higher for a fourth straight session as budget talks in Washington broke down and as investors nervously awaited the Federal Reserve Board’s meeting Tuesday. Economists are split on whether the central bank will ease short-term interest rates to help the sluggish economy.
The 30-year Treasury bond yield finished at 6.09%, up from 6.08% on Thursday and 6.04% on Monday.
“Everybody is kind of sitting and waiting to see what the Fed will or won’t do on the 19th,” said one bond trader.
Among Friday’s highlights:
* Apple Computer led technology shares lower after it warned of a potential loss, owing to disappointing holiday computer sales.
The news slammed tech shares in general for a second day. On Thursday, electronics giant Nokia warned that its color TV sales in Europe were far below expectations, and computer chip maker Micron Technology said memory chip prices are expected to soften in early 1996.
Apple slumped 3 to 35 1/4 on Friday, Nokia fell 2 to 33 1/2 and Micron plunged 5 1/8 to 44 7/8.
Other tech losers included Intel, down 1 3/4 to 58 1/4; IBM, off 3 1/2 to 90 1/4; Texas Instruments, down 3 3/4 to 49; Computer Sciences, off 2 3/8 to 70 1/4; and Netscape Communications, which fell 5 1/4 to 130 1/2.
* Computer retailers also slumped. Circuit City dropped 1 1/4 to 28, Best Buy lost 1 to 17 1/8 and Tandy sank 3 to 37 1/4.
* Some industrial stocks also slid, perhaps on concerns about the economy. Monsanto fell 3 5/8 to 118 1/8, Caterpillar dropped 2 to 60 and Potash lost 2 1/2 to 65 1/4.
But other industrial issues gained, including GE, up 1 to 72 3/8; GM Hughes, up 3/4 to 48 3/4; and Eaton, up 1/2 to 54 1/8. Analysts said it was difficult to ascertain which stocks were buffeted by fundamentals and which were moved by triple-witching trades.
* Analysts noted that shares of companies in industries whose earnings growth is usually less volatile than that of technology continued to attract buyers.
For example, Hershey Foods surged 1 3/4 to 67 1/4, Ralston Purina rose 7/8 to 65 3/8, supermarket chain Kroger added 1 to 37 3/8 and Bell Atlantic jumped 1 7/8 to 68 5/8.
Also, biotechnology shares were up strongly, as were many electric and gas utilities.
* Kmart plunged 1 1/8 to 6 3/8 on new rumors that it may seek bankruptcy protection. The firm said it doesn’t face a cash shortage.
In commodities trading, crude oil prices surged to their highest level in six months, boosted by forecasts for more cold weather and tight supplies.
In foreign stock markets, Mexico’s Bolsa stock index rebounded 100.25 points to 2,675.69 on news of more government help for the banking sector.
Market Roundup, D3
