FINANCIAL MARKETS : Stocks, Bonds Static After Treasury Sale
The stock market closed with little changed Tuesday, as an eagerly anticipated government financing operation got off to a disappointing start.
Treasury bond yields started down in anticipation of the Treasury sales, but bounced back due to disappointing demand from investors, particularly big Japanese buyers, for new three-year notes at the government’s quarterly auction. The yield on the Treasury’s main 30-year bond ended the day unchanged at 6.88%.
Analysts said the auction of $18.0 billion in three-year notes--the first of three offerings that will run through Thursday--was disappointing. An additional $13.0 billion in 10-year notes will be auctioned today and $11.5 billion in 30-year bonds Thursday.
The lack of foreign interest weighed on sentiment in stock and bond markets.
“The stock market hasn’t gone anywhere since the Fed eased [on] July 6,” said David Shulman, Salomon Bros.’ chief equity strategist. “Without support from the bond market, stocks will find it difficult to maintain their upward momentum.”
The Dow Jones industrial average finished unchanged at 4,693.32 while broader indicators posted minor moves. Disappointing earnings at Limited and AnnTaylor Stores heightened concern a slower-growing economy is dampening profit growth.
Technology shares gained for a third day amid speculation demand for semiconductors and software will remain steady.
Ricky Harrington, senior vice president and technical analyst at Interstate/Johnson Lane, said stocks could remain range-bound indefinitely as Wall Street slumbers through the summer doldrums, a typically uneventful season for equities.
Also keeping investors sidelined are two important economic reports due later this week. The data Thursday on prices at the wholesale level and on Friday on consumer prices, will be scrutinized by the markets for clues as to whether the recent revival in economic activity has stoked inflation.
Among market highlights:
* Topping the NYSE actives list was The Limited, which fell 1 3/8 to 18 7/8 after the retailer warned that its third quarter earnings will be sharply lower than a year ago due to weak women’s apparel sales.
* CPC International rose 1 3/8 to 63 7/8 after it announced late Monday that it will buy Kraft Food’s baked goods business. Kraft Foods is a unit of Philip Morris, which rose 3/8 to 74 7/8.
* Crown American Realty Trust shed 3 1/4 to 9 1/4 after it posted a second-quarter loss versus a year-ago profit and cut its quarterly dividend. PaineWebber downgraded the stock.
* RailTex tumbled 7 3/4, or 26.5%, to 21 1/2. The company announced second-quarter earnings of 22 cents a share, which were 11 cents below Wall Street’s expectations.
* Archer-Daniels-Midland rose 7/8 to 16 7/8. Donaldson Lufkin & Jenrette upgraded the stock to outperform.
Mixed movements overseas exerted no noteworthy influence on Wall Street. Shares rebounded in Tokyo with the 225-issue Nikkei Stock Average gaining 223.51 points, or 1.35%, to close at 16,838.97. Prices drifted lower in Frankfurt and London and crept ahead in Paris.
At the Chicago Board of Trade, December wheat rose 18 cents a bushel to close at $4.49 1/4.
