Mixed Signals, Options Expirations Pushing Some Traders to the Sidelines

It's hard to get a handle on the direction stocks will take today.
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Usually, a bout of late-day selling like

yesterday's will trigger one of two things at the bell the next morning: Stocks will go up sharply, or stocks will go down sharply.

When they go up sharply, odds are it's a head fake (assuming an absence of big news). Better to wait for prices to come down than chase the rally. When they go down, odds are that stocks will find a level and then bounce. Catch them near their nadir, and money is made.

But today stocks look pretty flat on the open, and that makes for an uncertain open. Note that today marks the expiration of May stock and index options, which always makes the market a little more volatile. That usually keeps investors out of the market -- as if the blue skies in New York weren't enough of an excuse.

"We're getting to that time of year when volume lightens up a lot on Fridays, particularly in the afternoon," said Dan Mathission, head stock trader at

D.E. Shaw

. Though thin volumes often make for volatility, Mathisson thinks today won't be too rocky. "The broader market -- I'm not expecting it to be a wild day. The market looks OK."

At 9 a.m. EDT, the

S&P 500

futures were unchanged, putting them near fair value and indicating a mixed open. But strength in the Treasury market -- where it is options expiration day as well -- looked like it might give stocks a boost. The 30-year was up 16/32 to 92 10/32, dropping the yield to 5.80%.

With investors heartened that the

Nikkei

will hold the 16,000 level and bargain hunters coming into the market, Tokyo stocks gained ground for a second day. Also boosting stocks: Finance Minister

Kiichi Miyazawa

, who said that the government may consider a supplementary budget. The

Nikkei

gained 92.99 to 16,292.98.

Hong Kong stocks dropped again. More than sellers, Hong Kong has seen a lack of buyers. With the interest-rate outlook unclear and expiration coming next week, many investors are opting to ride the pine. The

Hang Seng

slipped 103.28 to 12,272.14.

With uncertainty over the U.S. open and expirations of their own to deal with, European bourses saw muted action. In Frankfurt, the

Dax

was up 24.96 to 5260.60. In Paris, the

CAC

was off 7.12 to 4414.79. And in London, the

FTSE

was up 12.6 to 6380.8.

Friday's Wake-Up Watchlist

By

Brian Louis

Staff Reporter

  • AK Steel (AKS) - Get Report is buying Armco (AS) for $7.50 a share in stock, or $842 million. Armco shares closed Thursday at 5 5/8.
  • Alcan Aluminum (AL) - Get Report was upgraded by Donaldson Lufkin & Jenrette to buy from hold.
  • Baker Hughes (BHI) named G. Stephen Finley chief financial officer, replacing Eric Mattson.
  • DaimlerChrysler (DCX) Chairman Robert Eaton said the company will look for more acquisitions as it shoots to double revenue within the next decade, and he indicated that financial services are a key area for expansion, The Wall Street Journal reported, citing comments made by Eaton during taping of AutoLine Detroit, a Detroit public television station program that's slated to air Sunday morning in Detroit.
  • Delphi Automotive Systems (DPH) will replace Moore (MCL) in the S&P 500 after the close May 27. General Motors (GM) - Get Report will complete the spinoff of Delphi May 28.
  • Donaldson Lufkin & Jenrette (DLJ) filed an amendment to its registration statement with the Securities and Exchange Commission regarding its proposed IPO of its online brokerage unit DLJdirect, raising the amount of shares to be offered to 16 million up from 15 million, and increasing the proposed price range to $18 to $20 a share from $13 to $15.
  • Keebler (KBL) reported first-quarter earnings of 37 cents a share, 2 cents ahead of the First Call 10-analyst estimate and up from the year-ago 16 cents.
  • Merck (MRK) - Get Report got Food and Drug Administration approval to market its Vioxx drug for relief of the signs and symptoms of osteoarthritis, management of acute pain in adults, and treatment of menstrual pain.
  • Olivetti's $65 billion hostile takeover bid for Telecom Italia (TI) expires today.
  • DLJ initiated coverage of priceline.com (PCLN) with a buy rating and set a price target of 190. The stock closed Thursday at 134 3/8.
  • Coty, a seller of fragrances and cosmetics, is in talks to acquire part or all of debt-ridden cosmetics company Revlon (REV) - Get Report, The New York Times reported, citing executives close to the negotiations. Coty is a unit of Benckiser (BNV) , a Dutch consumer products company. The Times article said that besides Coty, among the other names that have been circulating as potential bidders are Unilever (UL) - Get Report; Shiseido, a Japanese cosmetics company; and Procter & Gamble (PG) - Get Report.
  • Bloomberg News reported yesterday that Warner-Lambert (WLA) is holding merger talks with Schering-Plough (SGP) . The report, citing a person familiar with the talks, says discussions have gone on over the past two years and have intensified in recent weeks, though no deal is pending and the talks could founder.
  • The Inside Wall Street column in Business Week reports that some analysts and money pros think Agco (AG) - Get Report, an agricultural equipment maker, could be a takeover target. The column quoted an unidentified New York investment banker as saying: "A foreign conglomerate is seriously considering making an offer of 24 a share." Agco stock closed yesterday at 10 5/8. Hauppauge Digital (HAUP) will announce a joint venture soon with a large Internet company that broadcasts streaming media programming on the Web and the company is also forming a marketing alliance with a major e-commerce company, the column reported, citing a New York money manager. The column also contains a bullish piece on Modem Media.Poppe Tyson (MMPT) .