Bargain Hunters Help Lift Beaten-Down Stocks
Stocks jumped Friday as fears of war with Iraq eased and bargain hunters bought shares beaten down by three straight days of losses.
Investors also took heart from a $1.4-billion settlement with Wall Street concerning biased stock research and data showing the U.S. economy expanded briskly in the third quarter.
But traders said the rally had more to do with investors looking for bargains after the market’s recent decline. As of Thursday, the Standard & Poor’s 500 index and the Dow Jones industrial average each had fallen about 6% since peaking in late November.
“We were due for a little rally, coming off the levels we were at,” said Jay Finkel, senior equity trader at Lord Abbett.
The Dow industrials closed up 146.52 points, or 1.8%, at 8,511.32. The broader S&P; 500 rose 11.51 points, or 1.3%, at 895.76. The technology-laced Nasdaq composite index rose 8.95 points, or 0.7%, to 1,363.05.
Winners led losers by 2 to 1 on the New York Stock Exchange and by 4 to 3 on Nasdaq.
For the week, the Dow rose 0.9%, the Nasdaq gained 0.1% and the S&P; 500 climbed 0.7%, snapping two-week losing streaks for all three indexes.
Trading was heavy Friday as investors positioned themselves during the expiration of futures and options contracts. Friday also marked a quadruple witching session -- when stock index futures, stock index options and individual stock futures and options expired simultaneously.
The expiration of so many contracts on the same day can lead to wild gyrations in prices of the underlying stocks, though that was absent Friday.
Changes to the Nasdaq 100 and S&P; indexes also took effect at the close of trading. The rebalancing can spark market swings, as index managers whose portfolios track the S&P; 500 and the Nasdaq 100 must buy and sell shares to ensure that their portfolios accurately reflect the makeup of the two indexes.
Heightened tensions over Iraq eased after U.S. officials said the next milestone would be reached Jan. 27, when U.N. weapons inspectors are scheduled to make their first substantial assessment to the Security Council.
The United States said Thursday that Baghdad was in “material breach” of a United Nations arms resolution, a term that could trigger war.
Gold, which has risen in recent weeks as Mideast tensions escalated, fell $5.40 to $340.50 an ounce in New York trading.
Treasury yields rose for the first time in four days after Federal Reserve Chairman Alan Greenspan said the economy is emerging from a “soft patch.” The yield on the benchmark 10-year Treasury note rose to 3.96% from Thursday’s close of 3.94%.
In other highlights:
* Shares of all 10 firms involved in the Wall Street settlement rose, including Citigroup, parent of Salomon Smith Barney, which gained $1.14 to close at $38.14. The Amex index of brokerage stocks climbed 1%.
* Nike jumped $3.57 to $45.10 after the world’s largest maker of sport shoes said quarterly earnings rose 18%. Nike rival Reebok International rose $1.92 to $29.50.
* Oilfield services company Halliburton sagged 42 cents to $19.08 after announcing that the Securities and Exchange Commission had launched a formal investigation into its disclosure and accounting practices.
* 3M added $3.83 to $124.13, for the Dow’s largest gain. The maker of circuitry, television parts and masking tape expects growth in Asia from sales of optical products and may consider splitting its stock if the economy improves, Chief Executive James McNerney said.
