Too Many Negatives Take Toll on Wall St.

Heightened terrorism fears and a “quadruple witching hour” sent stock prices tumbling Friday, resulting in the second week of losses for major stock indexes.

“People didn’t want to go home for the weekend with a lot of market exposure today,” said Scott Wren, senior equity strategist at A.G. Edwards & Co. in St. Louis. “Not a lot was happening -- there was just a lot of nervousness.”

Investors were keeping a wary eye on military action along the Pakistan-Afghanistan border, Wren noted, with some fearing that the hunt for suspected Al Qaeda leaders by U.S. and Pakistani troops could raise the risk of a terrorist strike.

Also playing a role in the sell-off was the expiration of options and futures contracts for stocks and stock index funds, which happens four times a year.

The simultaneous expiration of these contracts, known as the quadruple witching hour, typically triggers heavy electronic trading -- and on Friday, many investors were heading for the exits.

“When the world looks unstable, people get nervous about equities,” said Mark Brown, president of the Denver-based investment management firm Brown & Tedstrom. “You’ve had all this terrorist activity in the last two weeks making people uncomfortable.”

More than 1.4 billion shares traded hands on the New York Stock Exchange, where declining issues outnumbered advancers by a near 2-1 ratio.

The Dow Jones industrial average fell 109.18 points, or 1.06%, to 10,186.60. The Standard & Poor’s 500 index lost 12.54 points, closing at 1,109.78, while the technology-heavy Nasdaq composite index was off 1.1%, or 21.97 points, closing at 1,940.47.

Bond prices fell, causing yields to rise. For the benchmark 10-year U.S. Treasury note, the yield ticked up to 3.77%.

Oil prices rose to $38.08 a barrel, but were still below the $38.18 mark hit Wednesday, the highest peak in 13 years.

Wall Street experts expressed mixed opinions about the future direction of stock prices, noting that while some fundamental economic indicators remained strong, there were also some troubling signs.

“Interest rates are low, productivity is very high, consumers are still buying and we expect earnings to beat expectations,” Brown said. “Any short-term negative volatility would be considered a buying opportunity in our minds.”

Gerald Appel, publisher of a market newsletter called Signals & Forecasts, disagreed. Not only are investors worried about weak job creation, the rapid rise in fuel prices is creating some serious concerns, he said.

“The most recent threat to the economy is the shortage of oil that could tweak inflation to a point where the Federal Reserve would have to start raising interest rates,” he said.

Rising interest rates can depress consumer spending and hurt a wide array of companies, while rising oil prices present a serious risk to utilities and already-troubled airlines, he added.

Appel predicted continuing volatility and little upward movement in stock prices for the rest of the year.

The Dow, which gained more than 200 points on Tuesday and Wednesday, lost 53 points for the week -- a decline of about one half of 1%. The S&P; 500 was off 1% for the week and Nasdaq tumbled 2.2%, recording its eighth weekly drop in the last three months.

Among the day’s highlights:

* Kmart Holding shares rose $1.07 to $38.13 on speculation that Sears Roebuck may be considering a bid for the discount retailer. Sears shares fell $1.08 to $43.40.

* Adobe Systems jumped $3.58 to $39.85, a 9.9% increase, thanks to earnings that doubled and soundly beat analysts estimates.

* 3Com shares dropped 37 cents to $6.69 after the company reported losses that were bigger than anticipated.

* Nucor, the largest U.S. maker of steel using recycled metal, jumped $4.18 to $62.26 on raised profit forecasts.

The company has been raising prices on heavy demand from China. Shares of United States Steel rose also, up $2.08 to $36.42.

Times wire services were used in compiling this report.

Market Roundup, C4