Stocks Rise on Tech Gains
Blue chips racked up the week’s largest gains in one of the Big Board’s busiest sessions Friday, buoyed by a rebound in technology stocks and the closing out of expiring options.
The Dow Jones industrial average ended 45.80 points higher at 5,705.23--its first move of more than 30 points in two weeks. Growing uncertainty about the direction of inflation and interest rates has muffled the market for weeks. For the week, the index was up 55.77 points.
The Nasdaq composite index rose 8.10 points to 1,175.44, snapping six straight sessions of losses.
The heavy trading volume--516 million shares--was linked to Friday’s “triple witching,” when futures and options on U.S. stock indexes and options on individual stocks expire at the same time.
The quarterly phenomenon can cause stock prices to change quickly and dramatically as orders to buy or sell large quantities sometimes lead to an imbalance between supply and demand.
However, Hugh Johnson, chief investment officer at First Albany Corp., said investors should not take Friday’s activity too seriously. “Buying or selling is artificial on triple witching, and everything you make on Friday you give back on Monday and vice versa, so Monday might be a tougher day.”
Otherwise, “the tech stocks are the story,” said Phil Orlando, chief investment officer of Value Line’s Asset Management division. “They began a very powerful bounce back Thursday, and that upsurge has continued with a vengeance throughout triple witching.”
Oracle’s report of robust earnings for the latest quarter boosted confidence in the technology sector, which took a beating this week. “That helped Nasdaq market participants’ psyche,” said Peter Green, technical analyst at Gruntal & Co.
Oracle reported fiscal fourth-quarter earnings of 40 cents a share, compared with 27 cents a year ago. The company’s stock rose 3 1/8 to 38.
“Oracle’s earnings were a positive piece of news that reminded the stock market [that] good companies are still growing their profits,” said James Weiss, deputy chief investment officer for stocks at State Street Research & Management Co. “Earnings for U.S. companies should meet or modestly exceed expectations this quarter.”
The strength spread to other technology stocks, with Cisco Systems adding 2 1/2 to 54 7/8 and Microsoft gaining 2 2/16 to 123 14/16.
“What we are seeing is a flight to quality among blue-chip techs. Technology outperformed the broad market by a wide margin and is essentially recovering from dramatically oversold levels from the past week,” Weiss said.
Bonds were steady. The yield on the Treasury’s main 30-year bond fell to 7.09% from 7.10% on Thursday. Early last week, the long-bond yield hit 7.20%, its highest level in 13 months, as investors grew more skittish about inflationary pressures in the economy.
Many investors have been reluctant to act before the Federal Reserve Board’s Federal Open Market Committee next meets on interest rate policy, July 2-3.
Among market highlights:
* Westinghouse Electric topped the actives list on the NYSE. Its shares rose 1 to 19 1/8, and those of Infinity Broadcasting, which Westinghouse has agreed to buy for $4.9 billion, gained 1 1/4 to 30 3/8.
* Casino shares fell after Harrah’s Entertainment said it did not expect its second-quarter results to meet analysts’ expectations. Harrah’s shed 3 1/2 to 27 5/8, Harveys Casino Resorts lost 7/8 to 20 and International Game Technology fell 3/8 to 17 5/8.
* Shares in Manhattan Bagel tumbled 7 1/2 to 13 3/4 after the company announced that questionable bookkeeping at its profitable West Coast I&J; unit would force it to restate downward its first-quarter results.
* Diamond Multimedia Systems was also hurt by an earnings warning. The stock closed at 10, down 3 3/4.
* International Business Machines shed 2 1/8 to 98 5/8. Soundview Financial said the company may not be able to meet Wall Street’s expectations for a second quarter per-share profit of $2.51.
Overseas, Tokyo’s Nikkei-225 stock average rose 0.4%, closing at a record high for 1996 of 22,530.65.
In Brazil, stocks soared after analysts boosted earning estimates for the nation’s benchmark stock, Telecomunicacoes Brasileiras. Telephone shares led the advance. The Bovespa stock index for the Sao Paulo exchange rose 2,301 points, or 3.95%, to 60,531.41, bringing its gain for the week to a blistering 7.42%.
U.S. cotton prices fell sharply as prospects for a bountiful crop and rising imports sparked trade and speculative selling. Dealers said surging U.S. imports have contributed to the market’s weakness.
July cotton on the New York Cotton Exchange closed down 1.68 cents a pound at 72.95 cents.
Commodity prices have been mostly steady in recent days, with losses in copper and cotton offset by higher soybean and grain prices.
Copper could fall next week, traders said, extending a drop to a two-year low. Concern persists that Sumitomo Corp. will sell from its copper holdings to help pay for the $1.8 billion in trading losses it announced a week ago.
“Sumitomo has huge positions still to sell,” said Daniel McEvoy, a manager of metals marketing at Credit Suisse in New York. “They haven’t sold everything yet, and even in 1994 they were holding more copper than Japan can consume each year.”
Copper for July delivery fell 3.6 cents, almost 4%, to 91.2 cents a pound on the Comex division of the New York Mercantile Exchange, the lowest price since April 28, 1994.
An unexpected rise in London Metal Exchange stockpiles magnified Friday’s drop. The LME said inventories in its warehouses rose 5,000 tons to 272,775 tons, the first gain in two weeks, with most of the rise in European and U.S. facilities.
Market Roundup, D4
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Turning a Corner?
The Nasdaq market, which had fallen by more than 5.5% in just over a week amid concerns about computer-industry profits, rebounded Friday. Daily closes:
June 21: 1175.34
Source: Bloomberg Business News
