US STOCKS-Economy worries, bearish options weigh on Wall St

* Economy concerns weigh on global equities

* August options expiration picture has bearish bias

* Indexes off: Dow 1.1 pct, S&P 500 1 pct, Nasdaq 0.8

* For up-to-the-minute market news see [STXNEWS/US]
(Updates to midday, changes byline)

By Angela Moon

NEW YORK, Aug 20 (BestGrowthStock) – U.S. stocks (Read more about the stock market today. ) fell on Friday as
renewed fears about the economy and bearish action in expiring
August options kept investors away.

Natural resource stocks such as Exxon Mobil Corp (XOM.N: )
and Freeport McMoRan Copper & Gold (FCX.N: ) came under pressure
as U.S. crude oil and copper futures fell.

Exxon Mobil, the largest stock in the S&P 500, dipped 1.1
percent to $58.63, while Freeport McMoRan Copper & Gold was off
2.2 percent to $70.53.

Wall Street tumbled to its lowest close in nearly a month
on Thursday after more weak data strengthened the argument that
the economy is slowing again.

The negative sentiment in the market carried over to
Friday’s trading, which is being influenced by options activity
ahead of expiration at the end of the session.

Larry McMillan, president of McMillan Analysis Corp, said
most of the August S&P 100 index (.OEX: ) open interest in
in-the-money, or profitable, call options has disappeared,
either through traders rolling or exercising their positions.

“As a result, there is a negative bias to the expiration
now,” he said, explaining the move lower. Call options convey
the right to buy an index or stock at a given price by a
certain date, and open interest shows the number of contracts
traded but not liquidated.

The Dow Jones industrial average (.DJI: ) was down 112.69
points, or 1.10 percent, at 10,158.52. The Standard & Poor’s
500 Index (.SPX: ) was down 10.66 points, or 0.99 percent, at
1,064.97. The Nasdaq Composite Index (.IXIC: ) was down 16.70
points, or 0.77 percent, at 2,162.25.

McMillan said a close below 1,060 for the S&P 500 “would be
a signal to turn fully bearish.”

Computer makers Dell Inc (DELL.O: ) and Hewlett-Packard Co
(HPQ.N: ) posted higher profits on Thursday, but both companies’
shares fell as doubts remained over the strength in technology
spending.

Dell fell 1 percent to $11.92, and Hewlett-Packard slid 3
percent to $39.55.

Usually additional volume and amplified stock moves are
seen in an options expiration week as traders adjust their
hedges. Such dynamics can lead to a strategy known as pinning
in which a stock or index closes at or around its corresponding
at-the-money option strike.

The weak economic reports discouraged options investors who
tried to pin the S&P 500 to the 1,100 strike, said Scott
Fullman, director of derivative investment strategy at WJB
Capital Group.

The sharp decline “invalidated the pinning of SPX to the
1,100 strike and to the $110 strike in the SPDR S&P 500 ETF
(SPY.P: ), both of which had the highest open interest for August
puts and calls.”
(Additional reporting by Doris Frankel; editing by Jeffrey
Benkoe)

US STOCKS-Economy worries, bearish options weigh on Wall St