NEW YORK: The blue-chip Dow ended at its highest level in about 19 months for the fourth straight day on Friday, while the Nasdaq and the broad Standard & Poors 500 index declined, in whipsaw trading driven by witching, the expiration of various derivative contracts.
Market players had been braced for heightened volatility due to the expiration of stock options, index options, index futures and single-stock futures.
Quadruple witching occurs each quarter on a Friday, and can trigger sudden moves in the market, as investors either exercise their positions or roll them forward at the last minute.
Today is mostly driven by the witch. Thats why its so choppy, said John ODonoghue, co-head of listed trading at Credit Suisse First Boston.
The Dow Jones industrial average ended up 30.14 points, or 0.29%, at 10,278.22, its highest close since May 17, 2002.
The Standard & Poors 500 Indexinched down just 0.52 of a point, or 0.05%, to 1,088.66. The technology-laden Nasdaq Composite Index shed 5.16 points, or 0.26%, to 1,951.02, based on the latest available data.
Friday marked the fourth straight up week for both the Dow and the S&P, and the second straight week of gains for the Nasdaq. For the week, the S&P added 1.4%, the Dow gained 2.4%, and the Nasdaq edged up 0.10%.
The major market gauges recovered from earlier lows, after traders brushed off an early afternoon report saying that US authorities were reviewing a possible terror threat to New York City.
ABC News had reported on its Web site that US intelligence sources received information about a credible and imminent threat to New York City, possibly by a suicide bomber. Later, ABC said US authorities were evaluating a surge of information related to possible terrorist threats to several US cities, including Los Angeles and Washington, D.C.
The reaction is very limited and, in the view of most traders, a total non-event, said Keith Keenan, vice-president of institutional trading at brokerage Wall Street Access. Most traders have become numb to it and look to buy any kind of sell-off related to that.
A US intelligence official said that we are in the process of trying to determine its credibility and trying to corroborate it, referring to an unspecified threat to New York. Separately, the New York Police Department said in a statement that it had no credible intelligence of a terrorist threat to New York.
Topping the list of the Dows best-performing stocks was Eastman Kodak, the largest US maker of photographic film that recently said it was shifting its focus to digital printing and away from traditional firm. Kodak rose 99 cents, or 4.2%, to US$24.56.
Alcoa Inc helped lift the Dow, after Morgan Stanley raised its earnings forecasts and rating on the worlds largest aluminium producer to overweight from equal-weight. Shares of Alcoa rose 92 cents, or 2.5%, to US$37.30, and were the Dows second-biggest percentage gainer.
But the Dows late afternoon gains were curbed by McDonalds Corp, the blue-chip averages biggest percentage loser. McDonalds stock fell after the US chains Japanese unit widened its loss forecast this year for cancelling a consulting contract with the founder of McDonalds Japan. Shares of McDonalds, which owns a 50% stake in the Japanese venture, slid 51 cents, or 2.1%, to US$24.30.
Equifax Inc also fell sharply on news that it expects to take a fourth-quarter charge of about US$23mil for asset write-downs and losses at a unit affected by new laws against unwanted spam e-mail. Shares of Equifax, the largest US credit reporting company, dropped 68 cents, or 2.8%, to US$23.87.
On the Nasdaq, Red Hat Inc shares rallied to a new 2003 high, a day after it posted strong quarterly earnings and sales. Shares of Red Hat, a leading distributor of the free Linux software that rivals Microsoft Corps Windows operating system, jumped US$3.21, or 22.5%, to US$17.49. Earlier, Red Hat hit US$17.59, a fresh 52-week high.
Among the forces of gravity pulling on the Nasdaq, though, were the shares of Paychex, which fell after Wachovia Securities said on Friday it cut its rating on the payroll services company to market perform from outperform. Paychex shares lost US$2.46, or 6.3%, to US$36.52. Reuters
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