FINANCIAL MARKETS : Talk of Drug Deal Enlivens Slow Trading
Takeover speculation in the drug sector enlivened a lethargic session for stocks as market measures closed mixed Wednesday.
Merger news involving companies outside the pharmaceuticals group also lent support to the stock market.
The Dow Jones industrial average, which reached its highest level since mid-June earlier this week, ended with a modest loss of 3.56 at 3,792.66.
Most broader market barometers edged ahead.
Gainers ended the day with a lead over losers of about 100 issues on the New York Stock Exchange, where trading was moderately active. Big Board volume came to 282.38 million shares as of 4 p.m. EDT, compared to 294.72 million Tuesday.
Drug stocks were the standouts as investors bet that other companies could become takeover targets following American Home Products’ $8.5-billion bid for American Cyanamid.
Among the market highlights:
* American Cyanamid kept most of the 29 1/4 gain it made in after-hours trading Tuesday on news that American Home Products had made the $95-a-share takeover offer.
It eased 2 1/4 to 90 3/4 from its late-trading peak of 93 on Tuesday.
* Warner-Lambert jumped 3 3/4 to 72 1/4, Schering-Plough rose 1 1/8 to 67 5/8, Upjohn gained 7/8 to 32 7/8, Amgen advanced 1 5/8 to 51 1/8 and Johnson & Johnson rose 7/8 to 48.
* Conrail climbed 2 1/4 to 56 1/2 and Norfolk Southern slipped 1/8 to 63 5/8 on a published report of merger talks.
* Unitrin rose nine to 48 3/4 in Nasdaq trading on news of a $2.6-billion cash takeover from American General. American General ended up 3/8 at 28 1/2.
* Snapple Beverage slumped 5 5/16 to 15 1/4 after its earnings fell below Wall Street’s expectations.
Announcements of intended acquisitions encouraged buying of other individual stocks. ElectroCom Automation surged 3 5/8 to 9 3/4 in heavy NYSE turnover in response to news that AEG, a unit of German industrial conglomerate Daimler-Benz, signed a $10-a-share deal to buy the supplier of document processors to the U.S. Postal Service. Daimler rose 1 1/8 to 52 1/2.
Apart from the takeover plays, analysts said, the session was uneventful.
Oded Levy, head of the Genesis Merchant Group trading desk, said investors paused to collect profits after the mini buying binge that developed late last week and carried over into Monday.
But he said the buying will resume.
“Investors who have been waiting on the sidelines have begun to selectively accumulate attractive equities,” he said.
Stocks bounced back after the bond market took comfort from reports of slower car sales in July and news that the Treasury’s borrowing needs won’t exceed expectations.
Unexpectedly weak sales figures from the Big Three auto makers sent bond yields lower. The sales slowdown supported the view that the economic expansion has eased to a sustainable, non-inflationary pace.
The key 30-year Treasury bond yield fell to 7.38% from 7.40% on Tuesday, pushing its price up 7/32 point, or $2.19 per $1,000 in face value.
Yields and prices move in opposite directions.
Rising stocks on several of the major overseas markets provided a positive backdrop for Wall Street.
Mexican shares closed higher for a fourth straight day as investors reacted to a sharp drop in domestic interest rates, traders said. The Bolsa index gained 28.79 points to close at 2,567.31.
In Frankfurt, the DAX 30-share average rose 12.53 points to close at 2,198.92, while in London the Financial Times 100-share average gained 2.9 points to finish at 3,160.4. Tokyo’s 225-share Nikkei ended at 20,632.73, down 27.40 points.
Among the popular U.S. market performance gauges, the NYSE composite index rose 0.43 points to 254.58 and Standard & Poor’s 500-stock index added 0.89 to 461.45. The Nasdaq composite index dipped 1.11.
In the currency market, meanwhile, the dollar slipped against leading foreign currencies as traders grew edgy ahead of the influential July unemployment report due on Friday.
The dollar fell against most other European currencies, but it was unchanged against the Japanese yen.
The United States has given Japan two months to make adjustments in its trade policies, and that has taken the focus off dollar-yen for the moment, traders said.
In New York, the dollar fetched 100.35 yen, the same as on Tuesday. The greenback fell to 1.577 German marks in New York, from 1.584.