FINANCIAL MARKETS : Stocks, Bonds Static After Treasury Sale
In a classic summer dog-days session, stock and bond markets closed with little change Tuesday, despite weaker-than-expected demand at the Treasury’s auction of three-year notes.
The Dow Jones industrial average, in modestly negative territory for much of the afternoon, closed exactly even with Monday’s finish of 4,693.32.
Most broader indexes were up or down by minuscule amounts, and losers edged winners by 11 to 10 on the New York Stock Exchange.
“The market seems to have stalled,” said William Raftery, analyst at Smith Barney. “These are the summer doldrums,” when many traders and investors are vacationing, he noted.
In the bond market, a midday decline in yields was reversed after the Treasury announced results of its three-year note sale, part of its quarterly “refunding” bond sale.
The $18 billion in notes sold carried an average yield of 5.997%, which was slightly above expectations, traders said.
“The bidding was fairly light and unaggressive,” said Stone & McCarthy Research Associates.
Hopes that Japanese investors would be big buyers--thanks in part to the dollar’s recent strength--were dashed, analysts said. But some traders said the Japanese are rarely significant buyers of three-year securities, preferring longer-term issues.
Japanese institutions will have another chance to bid for Treasuries today and Thursday, when the government sells 10-year notes and 30-year bonds, respectively.
Despite disappointment over Tuesday’s auction, the bond market didn’t suffer much. The 30-year T-bond yield closed unchanged at 6.88% after slipping to 6.85% at midday. Shorter-term yields also ended mostly flat.
The dollar followed bonds, rallying in the morning and then pulling back by the close. It finished at 91.47 yen in New York, up a bit from 91.39 on Monday, and at 1.408 German marks, down from 1.409.
Among the market highlights:
* Biotechnology shares provided a bit of flash on an otherwise dull day. Many biotech issues surged after Genzyme said the Food and Drug Administration agreed to speed up a review of the firm’s proposed membrane treatment to control surgical-adhesion problems.
Genzyme, which gained 2 1/2 after the FDA decision on Monday, eased 1 1/2 to 57 on Tuesday. But the news helped reinvigorate biotech shares in general, many of which have been soaring this year on optimism about product approvals.
Amgen soared 3 1/4 to 87 5/8, Chiron leaped 1 13/16 to 77 5/8, Cephalon soared 3 1/4 to 27 1/4, Gilead Sciences jumped 1 3/4 to 21 3/4 and Somatogen added 1 1/2 to 20.
* Computer-related stocks were mostly higher. IBM added 1 to 109 5/8, Dell jumped 1 3/4 to 68 1/8, Adobe Systems surged 2 to 59 1/4 and Intel gained 1 1/4 to 64 3/4.
* Limited sank 1 1/2 to 18 3/4 after the retail giant forecast that current-quarter earnings will be down 25% to 30% because of weak women’s apparel sales. But the announcement had little effect on other major retail stocks, most of which closed up slightly.
* RailTex tumbled 7 3/4 to 21 1/2. The short-haul railroad reported lower-than-expected earnings.
In foreign trading, shares rebounded in Tokyo, with the Nikkei-225 index gaining 223.51 points to 16,838.97.
Key Latin American markets, however, were hit by profit taking after surging Monday. In Mexico City, the Bolsa stock index dropped 27.09 points to 2,538.31.
