Dow surges 30.51 in heavy trading

March 19, 1994|By Bloomberg Business News

NEW YORK -- U.S. stocks closed higher yesterday as a late burst of computer-driven buy orders tied to the quarterly expiration of stock options and futures offset concern that the Federal Reserve may soon raise interest rates.

Trading was the fourth-heaviest in history as investors unwound equity positions tied to March's expiration of individual stock options, stock index options and index futures contracts. About 462 million shares traded on the New York Stock Exchange, the highest one-day total since Oct. 21, 1987.

About three-fourths of yesterday's trading was related to the so-called "triple-witching" expiration, said Phil Smyth, market analyst at Birinyi Associates Inc., a research firm which tracks computer-driven trading.

The Dow Jones industrial average rose 30.51, to 3,895.65, buoyed by gains in Aluminum Co. of America, Boeing Co. and General Electric Corp.

The Standard & Poor's 500 Index rose 0.16, to 471.06, while the Nasdaq Composite Index closed at an all-time high for a second straight day, gaining 0.08, to 803.93. The American Stock Exchange Market Value Index climbed 2.35, to 472.98.

"The market had a good day given all the concern about interest rates," said Daniel Marciano, senior trader at Dillon, Read & Co.

Federal Reserve Chairman Alan Greenspan canceled a speech in Houston yesterday so he could meet with President Clinton at the White House. Mr. Greenspan's meeting with the president prompted speculation that an increase in interest rates was imminent.

Gene Sperling, an aide to Mr. Clinton, said Mr. Greenspan and the president met for about an hour. He said they did not discuss interest-rate policy.

Traders weren't convinced. "I would presume they talked about raising interest rates," said Harrison Roth, first vice president at Cowen & Co. "What else would they be talking about?"

The Federal Reserve's Federal Open Market Committee is scheduled to meet Tuesday to review monetary policy. The last time the Fed raised interest rates, on Feb. 4, the Dow industrials plunged 96 points.

It's unlikely the stock market would fall as much this time if the Fed were to raise rates, said Donald Kimsey, market analyst at Smith Barney Shearson Inc.

"For the past month-and-a-half, the stock market has been shaky because of trepidation about the Fed," Mr. Kimsey said. "Another interest rate hike is already priced into this stock market."

The yield on the 30-year Treasury bond surged yesterday to a high of 6.92 percent, from a low of 6.82 percent, before closing at 6.90 percent. As rates rise, investors tend to move funds from the stock market to fixed-income securities, which are perceived as a less risky investment.

Northwest Airlines Corp., Hanson PLC, Wal-Mart, American Telephone & Telegraph Co. and Du Pont Co. were the five most actively traded issues on the U.S. Composite.

Northwest Airlines closed unchanged, at $13, in its first day of trading on the Nasdaq system. The airline raised $260 million in its initial public offering, 35 percent less than the company planned.

Alcoa shares gained $1.625, to $77.125. The company announced plans to close four plants and eliminate 50 jobs in a restructuring of its recycling business.

Conrail Inc. declined $1.375, to $59.75. The railroad is experiencing delivery delays, higher costs and disruptions because of winter weather in the Northeast and Midwest and an increase in freight shipments, the Wall Street Journal reported.

20th Century Industries slumped $3.625, to $21.50. The insurer said it expects to take a charge of $3.15 a share for claims arising from the Los Angeles earthquake.

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