Corporate participants reported another quiet day yesterday, with prices slightly improved and one large deal priced in the primary sector.
The head of a trading desk said spreads remained largely unchanged in "one of the quietest days of the year."
The tone of the market was given a boost early in yesterday's session with the revised report of after-tax corporate profits for the third quarter.
Initially, the report showed a 6% decline in profits for the quarter, due in large part to the effects of hurricanes Andrew and Iniki.
One participant said that without the two storms, corporate profits would have risen 6.9% in the quarter.
However, the revised numbers showed a decline of only 4.5%. With this decline, corporate profits are in a position to increase 20% to 25% for the year, traders said.
"This number is more encouraging than we had expected," the head of a syndicate desk said. "This puts us in pretty good position for the end of the year."
The syndicate head said the improved numbers quieted the market.
"There really is no reason for much trading now," he said. "If the numbers showed a weaker revision, there would have been a bit more action designed to improve the strength of portfolios for the end of the year. I think we are all done for 1992."
Traders also said that comments made by Chairman-elect Robert J. Eaton of Chrysler Corp. also gave the market an early lift.
Eaton said he expects car and truck sales in North America in 1993 to be about 5% higher than this year's 15 million units.
He commented that how quickly the country reacts to some "generally positive" economic news expected in the first quarter of 1993 will be "very important" to the company's performance.
"If we're lucky, we might see enough improvement next year to approach 15.5 million units," Eaton added.
David Blitzer, chief economist at Standard & Poor's Corp., said the better feel and tone of the corporate market is largely attributable to renewed hope for an economic recovery in 1993.
"The Federal Reserve is going to sit tight," Blitzer said. "All those who were so scared about a Clinton presidency are now seeing a pretty moderate guy who's in tune with the markets."
Blitzer said Clinton's statement about strengthening the dollar while providing an "economic jump start" gave government and corporate traders a good feeling about his economic plan.
"The economic summit brought out a diverse bunch of opinions on the economy," Blitzer added. "That signaled that Clinton seems open to different ideas about how to get the country on the right track."
An issue of $25 million of Federal Farm Credit Bank medium-term notes due Dec. 30, 1999, was priced yesterday by a Morgan Stanley & Co.-led group.
The notes were priced at par to yield 6.75% and were priced 39 basis points over the corresponding Treasury note.
In secondary trading yesterday, market participants snored through a lackluster session. Traders said that prices on high-yield issues were "a solid 1/8 to 1/4 point higher," with high-grade issues up about 1/4 point.
Officials at USAir Inc. and British Airways announced yesterday morning that a planned $750 million investment by the British carrier was withdrawn.
USAir Deal Pulled
USAir officials said concerns over whether the U.S. Department of Transportation would approve the investment or place conditions on it caused British Airways to remove the offer from the table.
Later yesterday, Standard & Poor's Corp. affirmed USAir's ratings.
The carrier's preferred stock is rated B-minus, its equipment trust certificates rated BB-plus, its special revenue bonds AA-minus, and its senior unsecured debt B-plus.
The rating agency said it was removing USAir from CreditWatch with positive implications, and said the long-term outlook for the corporate debt was negative.
In a release, the ratings agency said the decision leaves USAir with "less financial flexibility and earnings potential but poses no immediate threat to their solvency."
Traders said the news had little effect on the USAir paper.
In another release, Moody's Investors Service warns that changes in the structure and ownership of British Gas could have a negative effect on the rating of more than $3 billion of outstanding debt and jeopardize the company's Aa2 rating.
The ratings agency said a review by the United Kingdom's Monopoly and Mergers Commission could threaten the strength of the company and force a diversification of ownership.
The review was prompted by a statement from OFGAS, a British regulatory agency, that maintains that the company's gas transportation and storage business should be under separate control and ownership.
The report was filed by OFGAS on Dec. 17. A final decision is not expected until late summer 1993, Moody's said.
In other rating news, Standard & Poor's downgraded Delta Air Lines Inc.'s senior debt to BBB-minus from BBB, its equipment trust certificates to BBB from BBB-plus, preferred stock to BB-plus from BBB-minus, and commercial paper to A-3 from A-2.
The ratings agency said the downgrade effects about $5.4 billion in corporate debt and is a result of continued heavy losses from the company and industry-wide, the impact of a slowing European economy, and increased expenses and debt coverage.
Standard & Poor's removed the company from CreditWatch with negative implications and reported that the longterm outlook for the rating is negative.
Also yesterday, Moody's lowered the long-term debt rating for Bell Canada to Aa2 from Aa1 for secured debt and to Aa3 from Aa2 for unsecured debt. The rating agency has also placed an Aa3 rating on the company's proposed sale of $200 million of Series EO debentures.
The agency said the decision by the Canadian Radio-television and Telecommunications Commission to introduce competition into the long-distance market will adversely affect the company's strength.
According to Moody's, the downgrade affects approximately $4.6 billion in long-term debt.