NEW YORK (CNNfn) - Modest gains crowned the last session of a Wall Street week in which market passions ran high as investors first feared, then gradually adjusted to the thought of a likely modest increase in interest rates.
The day's main feature, the "triple witching" expiration of stock index options and futures and options on individual stocks, failed to produce its usual volatility, resulting only in sharply heightened volume in the first hour of trading.
The Dow Jones industrial average edged up 13.95 points to 10,855.56. The blue chip index advanced a solid 3.48 percent this week and is now up 18.23 percent for the year. On the New York Stock Exchange, advances outpaced declines by 1,533 to 1,378.
Although activity slowed slightly as the day wore on, volume still reached a hefty 906 million shares, boosted by the heaviest first-hour trading ever seen on the NYSE. Analysts attributed the brisk opening-hour volume of 345 million shares to the "triple witching," which happens once a quarter and can lead to extraordinary market volatility.
The Nasdaq composite rose 19.29 points to 2,563.44, and the S&P 500 index inched up 2.94 to 1,342.84. The Nasdaq added 4.72 percent this week to advance 16.91 percent for the year. The S&P 500 index gained 3.80 percent and is up 9.24 percent for the year.
"To some extent everybody is a little exhausted," said Hugh Johnson, chief investment officer at First Albany Capital Markets. "In the absence of big news
we'll see a quieter day. It feels like we were hit by a tidal wave over the past three or four days and today is like the aftermath, picking up the pieces."
Joseph Battipaglia, stock strategist at Gruntal & Co., said Thursday's reassuring comments by Federal Reserve Chairman Alan Greenspan came to soothe the market and pave its way out of the recent correction. (296K WAV) or (296K AIFF)
The bond market fell after its strong rally Thursday, as most investors took a breather and appeared comfortable with the thought of a limited Federal Reserve interest rate increase, a scenario that Greenspan hinted at in his congressional testimony. The benchmark 30-year Treasury bond lost 7/32 of a point in price, for a yield of 5.97 percent.
The dollar enjoyed a wild ride, rising sharply against the yen after several world central banks were said to have intervened in the market, buying euros against yen. Only the European Central Bank confirmed it had done so and said the move came at the request of the Bank of Japan. As a result, the dollar and yen both eased against the euro.
Taking witching in stride
Having absorbed and adjusted to the idea of a limited interest rate increase, the stock market appeared set for a break Friday. Although many investors were hungry to take some profits off the table from the past two straight days of gains, others rushed in to scoop up bargains or fill open positions ahead of the expirations.
Regardless of where this left the Dow, Al Goldman, chief market strategist at A.G. Edwards, said "the important thing is
the market has had its correction."
Goldman singled out cyclical stocks as likely short-term market leaders. Cyclical manufacturing and resource shares prosper in periods of economic growth, which Fed chief Greenspan Thursday called a major priority of the Fed to sustain.
"Cyclicals have been the lead sled dogs of the last couple of months," Goldman said. "My sense is that they have another month or two out from under the mushroom and out in the sun."
Among the cyclical Dow members, Caterpillar (CAT) climbed 2-5/8 to 61-1/2 and International Paper (IP) rose 1-7/8 to 55-3/16.
Intel overshadows techs
Technology shares were mixed, caught between investors' hunger for tempting bargains and what A.G. Edwards' Goldman called a combination of profit-taking and disparaging comments for sector heavyweight Intel (INTC).
Shares of the chip maker shed 3-1/16 to 54-15/16 after Mark Edelstone, analyst at Morgan Stanley Dean Witter, cut his rating on the company to "market outperform" from "strong buy," and cut his earnings projections for Intel for both 1999 and 2000. News of delays in the production of one of Intel's new chips added pressure on the stock.
Chip-equipment makers fell in parallel with the semiconductor giant. Applied Materials (AMAT) shares lost 2-9/16 to 66-5/8, ASM Lithography (ASML) eased 3/8 to 56-7/16 and Novellus (NVLS) lost 1-15/16 to 64.
In the computing industry, one of Edelstone's Morgan Stanley colleagues, Thomas Kraemer, remained "steadfast" on IBM (IBM). Kraemer raised his price target on the Dow computer maker to $135 from $115, citing the company's fundamentals and intensive Internet strategy as justification. IBM shares edged up 9.16 to 120-3/4, while fellow Dow tech Hewlett Packard (HWP) gained 2-5/8 to 91-15/16.
Elsewhere in the sector, Dell (DELL) gained 3/16 to 36-11/16 but Compaq (CPQ), which gave the market a bearish tremor Thursday by warning of losses ahead, slipped 3/4 to 21-3/4. Gateway (GTW) lost 2 to 65-1/16.
Investors rallied to software maker Adobe (ADBE), sending shares up 8-11/16, or nearly 12 percent, to 82-9/16 after the company reported second-quarter earnings that beat market estimates.
Telecom gets a lift
Despite the weakness of the broader market's gains, communications shares were more robustly higher Friday after being left out in the cold in recent sessions.
Shares of digital-communications provider Qwest (QWST) climbed 1-15/16 to 37-15/16 after long-distance carrier Frontier (FRO) said it will ignore Qwest's unsolicited $13.6 billion takeover bid to pursue a $10.8 billion merger offer from Global Crossing (GBLX) instead.
Frontier shares rose 9/16 to 58-5/16 and Global Crossing jumped 15/16 to 49-3/4, while U.S. West (USW), which also is caught between rival merger bids from Qwest and Global Crossing, closed up 1-15/16 at 37-15/16.
Elsewhere in the sector, Dow telecom AT&T (T) rose 1-3/16 to 55-5/8 and American depositary receipts (ADRs) of Swedish wireless-equipment maker Ericsson (ERICY) gained 1-1/4 to 32-13/16.
Among the day's other top newsmakers, Gillette (G) shares tumbled 5-1/8, or almost 11 percent, to 42-3/16 on the razor maker's late Thursday warning that second-quarter earnings per share likely will fall 20 percent below last year's.
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