Stocks surged Friday, as investors drew optimism from Alan Greenspan’s latest assessment of the economy, the resignation of Sen. Trent Lott as the Republican leader in the U.S. Senate, and the news that brokerage firms had reached a settlement on conflict-of-interest charges.
“The fewer of those types of things people have to worry about, the more people can focus on the fact that the economic news is not all that bad and the prospects for the stock market in 2003 are pretty good,” said Scott Wren, equity strategist for A.G. Edwards & Sons.
The three main indexes posted a weekly gain to snap a two-week losing streak.
The Dow Jones industrial average climbed 146.52 points, to 8511.32. The broader market also finished higher. The Nasdaq composite index rose 8.95, to 1363.05. The Standard & Poor’s 500 index gained 11.51, to 895.76.
For the week, the Dow rose 0.9 percent, while the Nasdaq edged up 0.1 percent, and the S&P 500 gained 0.7 percent.
Federal Reserve Chairman Greenspan told the Economic Club of New York late Thursday that since the Fed’s last rate cut on Nov. 6 there is some evidence that the “U.S. economy has been working its way through a soft patch.”
And Friday, 10 of the nation’s largest brokerages agreed to pay more than $1.4 billion in one of the largest settlements ever with securities regulators.
That helped lift financial sector stocks. Citigroup rose $1.14, to $38.14. Merrill Lynch gained 30 cents, to $40.15. Goldman Sachs climbed $1.56, to $71.86. All were involved in the settlement.
“That’s typical when something is resolved,” said Gary Wedbush, head of trading of regional investment bank Wedbush Morgan. “You’d think a $1.4 billion settlement would be negative news, but now you’ve removed some uncertainty.”
In addition, some investors are looking to cash in some gains from the eight-week surge in the autumn and are uncertain whether Wall Street can stage its traditional holiday rally in the last two weeks of December.
“I think it will be an upward-trending market here,” said Kevin Gaughan, portfolio manager and equity strategist at Strong Financial Corp. in Milwaukee.
“The investment math of our business has been on our side recently. The earnings numbers are better. This week we had some pockets of good news, and that’s helped.”
News of Lott’s resignation also gave the market a boost.
“The guy had become a liability to the Republican Party and, therefore, the president’s agenda,” Wren said. “They need to focus on an economic stimulus.”
Friday marked quadruple witching, when stock index futures, stock index options and individual stock futures and options expired simultaneously, and trading was heavy.
Almost 1.78 billion shares changed hands on the New York Stock Exchange, or about 500 million more than recent sessions, while about 1.7 billion shares traded on Nasdaq.
The expiration on the same day of so many contracts can lead to wild gyrations in prices in the underlying stocks, though that was absent Friday.
“This expiration has been moderate. The expiration of individual stock options was quiet,” said Jonathan Flatow, stock option index trader at the Chicago Board Options Exchange. “Index options saw a little action, but it was not extreme.”
Nike Inc. jumped $3.57, or 8.6 percent, to $45.10, after the world’s largest maker of sport shoes said quarterly earnings rose 18 percent.
Oilfield services company Halliburton Co. sagged 42 cents, to $19.08, after saying the Securities and Exchange Commission had launched a formal investigation into its disclosure and accounting practices.
