Smaller Stocks Hold Up Better Than Dow 30

The stock market’s wild ride on Friday ended with smaller stocks looking better than their blue-chip brethren--a significant switch from recent weeks.

The Nasdaq composite index of mostly smaller stocks closed up 1.55 points at 1,524.74, helped by a rally in many tech shares.

The Russell 2,000 index of smaller issues was off just 0.32-point to 420.03 after trading as low as 412.68.

Both small-stock indexes looked remarkably strong compared with the Dow Jones industrials, which ended down 90.21 points at 7,756.29 after recovering from a 296-point morning sell-off. (Main story, A1.)

Blue chips were riled once again by more bad news out of Asia, where most markets plummeted overnight on fresh pessimism about South Korea’s prospects and on news of the bankruptcy of Japan’s Toshoku Corp., a major foodstuffs trader.

Tokyo’s Nikkei-225 stock index dove 846.75 points, or 5.2%, to 15,314.89, while Seoul’s main index sank 5.1% and Hong Kong’s lost 3.2%.

Most European stock markets also suffered heavy selling before the U.S. market opened. The main Frankfurt stock index sank 2%.

On Wall Street, early selling was compounded by Friday’s quarterly expiration of stock index futures, options on those futures and common stock options. Such so-called “triple witching” expirations can force traders to close out complicated short-term market bets, leading to either heavy buying or heavy selling of stocks.

But the plunge in blue-chip issues quickly brought in buyers. What’s more, the market seemed to handle with relative ease the huge trading volume: 793 million shares on the New York Stock Exchange, second-heaviest ever.

Analysts say stocks could continue to be buffeted in coming weeks by concerns that Asia’s economic debacle will dramatically slow world economic growth, depressing corporate profits.

Still, “The market panicked [Friday], and then it was back to reality,” said Bob Dickey, a technical analyst at Dain Bosworth Inc. in Minneapolis. “The perception is, with low inflation and moderate growth, the U.S. is one of the safest places to invest in the world.”

Stocks were helped by another decline in long-term bond yields, as the 30-year Treasury bond dipped to a four-year low of 5.92% from 5.93% Thursday.

“The bond market looks good,” said William Gross, who oversees $110 billion of bonds at Pacific Investment Management Co. in Newport Beach. He sees 30-year yields falling to 5.5% in 1998.

Among Friday’s highlights:

* Blue chips closing off included American Express, down $1.81 to $86.94; DuPont, down $2.13 to $56.13; Merck, off $2.50 to $102.63; and Travelers, down $2.13 to $53.

* On the plus side, many beaten-down tech stocks closed up for the day. IBM rose $2.13 to $102.13, Adobe Systems gained $2.25 to $36.88, Micron Technology soared $3.19 to $27.19 and Motorola was up $2.44 to $58.25.

* GE fell $1 to $73 but recovered from a low of $70.31, after raising its stock buyback program by $4 billion. For some traders the timing of GE’s announcement recalled a similar move by IBM on Oct. 28--the day after the Oct. 27 rout, when the Dow fell 554 points.

Market Roundup, D4