Stocks closed mostly lower in choppy trading Friday as a late flurry of program buying tied to "double-witching hour" helped the Dow finish in positive territory but fell short of leading the broader market to a recovery following earlier losses fueled by bonds' continued weakness.
The Dow Jones industrial average, which fell 19.01 points Thursday, bounced back 8.67 points to 3694.01.The Dow recovered after being down more than 28 points earlier in the session, with big losses in four Dow components putting an extra burden on the key barometer.
However, late buying pared the four issues' losses. United Technologies dropped 13/4 to 627/8, Sears Roebuck lost 1 to 56, IBM fell 7/8 to 517/8 and McDonald's eased 1/4 to 561/2.
The New York Stock Exchange composite index eased 0.67 to 255.53, while Standard & Poor's 500-stock index fell 1.02 to 462.60. The price of an average share lost 9 cents.
Declines pounded advances 1,437-658 among the 2,673 issues crossing the NYSE tape.
Adjusted volume amounted to 300,886,000 shares, compared with 310, 399,000 in the same period Thursday. Volume was inflated by program trading tied to the "double-witching hour" - the monthly expirations of stock-index futures and options on the same day.
Prices ended slightly lower on the American Stock Exchange and the Nasdaq Stock Market for a five-day losing streak.
Treasury securities remained near session lows, while the U.S. continued to give back some of its gain against the mark.
The bellwether 30-year Treasury bond, which dropped 27/32 Thursday to yield 6.24 percent, was down another 1-8/32 to 98-26/32. The issue's yield, which moves in the opposite direction of its price, was 6.34 percent.
The dollar changed hands at 1.7145 German marks and 108.55 Japanese yen, up from 1.7125 marks and 107.28 yen late Thursday.
In overseas trading, the Tokyo stock market sank to its lowest level in eight months, while the major European exchanges also retreated.
On Wall Street, Eugene Peroni, chief technical analyst at Janney Montgomery Scott Inc. in Philadelphia, was not sanguine about the market's finish.
The late expiration-related buy programs helped "mostly the blue chips. It was not a broad-based recovery," he said, adding the broad market failed to "participate because the weak bond prices kept the broad market under pressure."
Peroni said program trading related to the monthly expirations made the session "quite volatile and unsettled."
Joseph Barthel, director of investment strategy at Fahnestock & Co. in Great Neck, N.Y., agreed that the market could not "shake off the fact that bonds are down and bond yields are heading higher and could reach the 6.40 to 6.45 (percent) area."
Barthel attributed bonds' continued slide to "a perception that moderate inflation is forhtcoming" following the recent stream of economic reports that "are reflective of a strengthening economy."
He said the stock market remained weak because "we're still not done with the corrective phase, which could bring us down to the 3600 area" on the Dow.
Analysts said Wall Street opened modestly lower, depressed by further weakness in bond prices following a worse-than-expected report on the nation's trade deficit.
Stocks retreated further Thursday as rising interest rates greeted investors instead of an expected morning-after bounce following the passage of the North American Free Trade Agreement.
Besides slumping bond prices, the analysts said the "double-witching hour" would be another factor affecting the market during Friday's session.
Shortly before the market opened, the Commerce Department reported that the U.S. merchandise trade deficit expanded 9 percent to $10.89 billion - its widest in three months - during September. Economists had expected a $10.14 billion deficit.
On the trading floor, Talbots Inc. paced the Big Board actives, closing at 225/8 on its debut. The 11-million-share offering of the Hingham, Mass.-based retailer and cataloger of women's apparels had been priced at $19.50 a share.
Merck followed, edging up 3/8 to 35. On Thursday, Merck and Medco Containment Services said their $6 billion merger, which combines the nation's largest pharmaceutical company and the largest prescription drug management company, had been completed.
Tiphook PLC was third, climbing 11/8 to 23/4 after the London-based renter of freight transportation equipment said it agreed to sell its Container Division to Transamerica for about $1.2 billion. But Transamerica eased 3/8 to 545/8.
The Amex Market Value Index fell 1.56 to 467.98, while the average price of an Amex share shed 4 cents. Declines topped advances 349-270 among the 854 issues traded. Volume edged up to 18,031,000 shares from 17,468,000 traded Thursday.
Atari led the Amex actives, falling 3/4 to 73/8.
The Nasdaq composite index lost 2.78 to 751.56. Declines outnumbered advances 1,365-938 among the 3,296 issues traded.
LM Ericsson Telephone led the Nasdaq actives, unchanged.