‘Triple Witching’ Session
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 over 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 sentiment in the technology sector, which was battered 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 Friday. 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 next meeting on interest rate policy, July 2-3. A series of mixed signals on the economy has intensified the debate over whether the Fed will raise rates to slow spending and inflation.
Among market highlights:
* Westinghouse Electric topped the actives list on the NYSE. Its shares rose 1 to 19 1/8 while those of Infinity Broadcasting, which Westinghouse has agreed to buy for $4.9 billion, gained 1 1/4 to 30 3/8.
* Casino shares took a beating after Harrah’s Entertainment Inc. said it did not expect to meet analysts’ earnings expectations in the second quarter. 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 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 per-share profit of $2.51 in the second quarter.
Overseas, Tokyo’s Nikkei stock average rose 0.4%, closing at a record high for 1996 of 22,530.65. Frankfurt’s DAX index rose slightly, and London’s FTSE-100 fell 0.1%.
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%.
Meanwhile, U.S. cotton prices fell sharply as bountiful crop prospects and rising imports sparked trade and speculative selling.
“In a sense, everybody is scared to death because it [the U.S. crop] is so good,” said O.A. Cleveland, a cotton marketing specialist with Mississippi State University.
Dealers said surging U.S. imports have also contributed to the market’s weakness.
“Improving crop conditions across the [Cotton] Belt, including Texas, coupled with the realization that both raw cotton and yarn are now freely flowing to the U.S. market, continue to push prices lower,” Cleveland said.
July cotton on the New York Cotton Exchange closed down 1.68 cents a pound at 72.95 cents after sinking to a lifetime low of 72.68 cents.
Weakness in cotton prices contributed to a decline in the Knight Ridder Commodity Research Bureau index of 17 futures, which ended 0.65 point lower at 248.61.
Commodity prices were mostly steady in recent days, with losses in copper and cotton offset by higher soybean and grain prices.
Next week, traders said, copper could fall, extending a drop to a two-year low, amid persistent concern that Sumitomo Corp. will sell from its copper holdings to help pay for $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. The LME issues stockpile reports each Tuesday and Friday.
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
