Dow Sprints To Weekly Finish Line
A late rally lifted the Dow Jones industrial average Friday to its best finish since late May. The surge came amidst unusually heavy trading driven by the quarterly expiration of options and futures contracts.
The Dow industrials rose 45.80 to 5,705.23, the first close above 5,700 since May 28 and the biggest gain since a 61-point rally May 20. The blue-chip average spent most of the session with with a gain near 20 before sprinting higher in the last half hour.
Growing uncertainty about the direction of inflation and interest rates has muffled the market’s moves for weeks, limiting Dow to moves of less than 30 points for the past two weeks.
Broader market measures also broke out of slumps as trading surged to its fastest pace since April.
Advancing issues outnumbered decliners by a 13-to-10 margin on the New York Stock Exchange, where volume totaled 516.41 million shares as of 4 p.m., up sharply from the sub-400 million levels of recent weeks.
About 200 million shares were traded near the opening bell, said Arthur Hogan, head stock trader at Dean Witter Reynolds, attributing it to the “triple-witching” phenomenon, when a variety of contracts to buy and sell stocks and related securities at specific prices expire on the same day.
The expiration prompts trades that try to exploit small price differences between futures and options and the underlying stock prices.
The Nasdaq market, which had fallen by more than 5-1/2 percent in just over a week amid concerns about computer-industry profits, rebounded amid some bargain-hunting and a positive earnings report from software maker Oracle.
The Nasdaq composite index rose 8.10 to 1,175.44, ending a six-session slide. Oracle rose $3.12-1/2 to $38 as the Nasdaq’s most active issue. Among the Nasdaq’s computer-related bellwethers, Cisco Systems rose $2.50 to $54.87-1/2; Intel rose $.25 to $71.37-1/2; and Microsoft rose $1.93-3/4 to $123.68-3/4.
The NYSE composite index rose 2.06 to 357.02, snapping a 10-session losing streak, and the Standard & Poor’s 500-stock index rose 4.74 to 666.84. But the American Stock Exchange’s market value index fell 0.29 to 584.95, its ninth consecutive losing session.
Bond prices improved, helping ease interest rates. The yield on the 30-year Treasury bond - a key determinant of corporate and consumer borrowing costs - edged dipped to 7.09 percent. Early last week, the long-bond yield hit 7.20 percent, 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’s next meeting on interest rate policy on 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.
Overseas, Tokyo’s Nikkei stock average rose 0.4 percent, Frankfurt’s DAX index rose slightly, and London’s FT-SE 100 fell 0.1 percent.