Stocks skid as drugmakers and banks take a hit
U.S. stocks skidded Thursday as drug companies and banks absorbed large losses. Drugmakers faced scrutiny over price increases, while banks fell as investors worried about the stability of Deutsche Bank and other financial institutions.
Stocks fell hard on renewed concerns about Germany’s largest bank. EpiPen maker Mylan sank after legislators called for an investigation of the company. The price of oil continued to rise, which sent oil drilling and equipment companies higher. Stocks gave up most of their gains from the last two days.
Quincy Krosby, market strategist for Prudential Financial, said investors don’t trust Deutsche Bank’s statements about its financial health and are worried what will happen to the bank and to the broader financial system if Deutsche Bank runs low on capital.
“The market begins to worry about Deutsche Bank and then the relationships Deutsche Bank has with other banks here in the United States,” she said.
The Dow Jones industrial average dropped 195.79 points, or 1.1%, to 18,143.45. The Standard & Poor’s 500 index sank 20.24 points, or 0.9%, to 2,151.13. The Nasdaq composite fell 49.39 points, or 0.9%, to 5,269.15.
Mylan slumped 4.4% to $38.47 after a group of senators asked the Department of Justice to investigate whether the drugmaker broke the law when it classified its emergency allergy shot EpiPen as a generic drug, which allowed Mylan to make lower rebate payments to states. The stock is down 21% since mid-August as the company has come under criticism for repeatedly raising EpiPen’s price over the last decade.
Other drug companies traded lower as investors worry that the government will take action to rein in drug price increases. Merck fell 2.2% to $61.91. Amgen fell 2.5% to $165.45.
Financial stocks slumped on renewed worries about Deutsche Bank. U.S. regulators are seeking $14 billion to settle legal claims over its sales of mortgage securities. It’s also unclear whether the German government would support the bank if it runs low on capital. Deutsche Bank has said it isn’t seeking government aid.
Deutsche Bank’s U.S.-listed shares have lost more than half their value this year. On Thursday, they tumbled 6.7% to $11.48 in heavy trading. JPMorgan Chase slid 1.6% to $65.65, and Goldman Sachs shed 2.8% to $158.95.
Oil prices continued to rise after a 5% surge the day before. Energy prices had jumped after the nations of OPEC, which collectively produce more than a third of the world’s oil, agreed to a small cut in production. The decision was a surprise, but investors had long hoped for it. The deal won’t be finalized until November.
U.S. crude rose 78 cents, or 1.7%, to $47.83 a barrel in New York. Brent crude, the international benchmark, advanced 55 cents, or 1%, to $49.24 a barrel in London.
Companies that drill for oil rose sharply as investors expected them to benefit from higher prices for crude. Devon Energy climbed 3.5% to $43.04.
Companies that provide rigs and other equipment to drillers also rose as investors expected that higher prices for crude will encourage more drilling. Helmerich & Payne rose 4% to $65.26. Companies that refine oil fell on the prospect they will have to pay more for the oil they refine. Marathon Petroleum sank 6.8% to $39.74, and Valero Energy slid 6.2% to $51.71.
ConAgra Foods climbed 7.2% to $46.25 after its profit surpassed analysts’ forecasts, thanks in part to lower costs. The company has sold several brands to focus on product lines such as Chef Boyardee and Hebrew National, and it’s getting ready to split into two companies.
CBS ticked up 0.8% to $54.57, and Viacom jumped 3.3% to $37.77 after Sumner Redstone’s National Amusements, which controls both companies, said it wants them to combine again. CBS and Viacom had merged in 1999 and split up in 2006.
Chip-makers Qualcomm and NXP Semiconductors surged after the Wall Street Journal reported that San Diego-based Qualcomm is in talks to buy NXP.
Bond prices moved higher. The yield on the 10-year Treasury note fell to 1.56% from 1.57%.
Wholesale gasoline fell 1 cent to $1.47 a gallon. Heating oil rose 2 cents to $1.51 a gallon. Natural gas fell 4 cents to $2.96 per 1,000 cubic feet.
Gold rose $2.30 to $1,326 an ounce. Silver rose 7 cents to $19.19 an ounce. Copper was flat at $2.19 a pound.
The dollar climbed to 101.07 yen from 100.75 yen. The euro inched up to $1.1216 from $1.1214.
Germany’s DAX lost 0.3%. Britain’s FTSE 100 climbed 1%, and the CAC 40 in France rose 0.3%. Japan’s benchmark Nikkei 225 index jumped 1.4%, and in South Korea, the Kospi advanced 0.8%. Hong Kong’s Hang Seng rose 0.5%.
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UPDATES:
2:10 p.m.: This article was updated with closing prices and additional information.
This article was originally published at 8:25 a.m.
