By Rebecca Melvin
New York, Feb. 14 - Convertible bonds were a little weaker across the board on Tuesday as the market begins to strike a more defensive tone and as equities languished for much of the session before rallying into the close - resulting in a "give back" of almost all of the day's stock losses.
Convertibles didn't see a concomitant rally and were instead generally quiet and heavier, market sources said.
"Things have come in across the board by 0.25 point to 0.50 point in the last few days," a New York-based trader said.
The convertibles of Foster City, Calif.-based Gilead Sciences Inc. were active and mixed, with shares seeing a little pull back this month following strong gains since December.
Las Vegas-based International Game Technology Inc. was said to be particularly heavy, with an outright seller in the name causing a multi-point drop there, a trader said.
Alcatel-Lucent SA's convertibles also traded actively and were steady in pricing despite higher shares. The action appeared to be follow-through from strong earnings posted by the Paris-based telecommunications-equipment maker late last week.
Strong earnings also propelled Charles River Laboratories International Inc. into trade, and those convertibles looked to be up in line with the underlying shares on Tuesday.
DryShips Inc. bucked the general trend with those convertibles and shares sharply higher. Greater economic clarity out of Greece should benefit the Athens-based shipping and oil drilling services company, according to a news release from Five Star Equities research early Tuesday.
Overall, though, the convertibles market was described as quiet.
"It was quiet the whole day. People are spooked by the broader macro picture so it's not surprising they would keep money on the sidelines," a New York-based trader said.
Retail sales for January came in a little weaker than expected. Retail and food service sales increased 0.4% from a month earlier, according to the Commerce Department, compared to a 0.9% increase expected.
Meanwhile, headlines coming out of Europe late in the day regarding the Greek debt crisis were viewed as favorable and encouraged a late buying spree in equities.
Alcatel-Lucent remains active
Alcatel Lucent's 2.75% B convertibles of 2025 traded actively between 95.25 and 95.5, which was steady on Friday's levels.
The Bs were active with the shares up $2.30.
"I think it's just carry through from Thursday night's results; I think guys are realizing that these bonds are cheap post those results," a New York-based trader said.
The Alcatel A tranche convertibles, which are more illiquid than the Bs, traded at 79.5 bid, 80 offered and were left at 79.5 bid by the end of the session, market sources said.
Late last Thursday, the telecommunications equipment maker posted its first profit since 2006 when Alcatel SA merged with Lucent Technologies Inc.
The company reported fourth-quarter earnings of $0.19 per share, which was ahead of consensus estimates, on revenue that fell 13% due to weakness in European, North America and Asia markets.
Charles River adds in line
Charles Rivers' 2.25% convertibles due 2013 traded up a little less than a point to 100.44 versus an underlying share price of $35.95.
Shares of the Wilmington, Mass.-based lab-testing products and services company were up 5% during the session and ended up $1.33, or nearly 4%, at $35.23 after the company reported fourth-quarter earnings that topped estimates.
The company reported fourth-quarter results that were weaker than expected but it held steady on its guidance for the current year.
Sales increased in its research models and services segment but declined in the preclinical services segment.
Mentioned in this article:
| Alcatel-Lucent SA: | NYSE: ALU
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| Charles River Laboratories International Inc. | NYSE: CRL
|
| DryShips Inc. | Nasdaq: DRYS
|
| Gilead Sciences Inc. | Nasdaq: GILD
|
| International Game Technology Inc. | NYSE: IGT
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