Drug Companies’ Swoon Infects Blue-Chip Stocks
A sell-off in shares of big drug companies dragged down blue-chip stocks Wednesday in the wake of a court ruling that could speed up the sale of a generic version of the antidepressant drug Prozac in the United States.
The broader market, however, fared relatively well, though share prices in general pulled back from their highs.
In commodity trading, crude oil futures surged in the wake of surprising data Tuesday showing that U.S. inventories are at 24-year lows.
On Wall Street, the Dow Jones industrials fell 71.06 points, or 0.7%, to 10,905.83, tumbling late in the day after a court ruled that generic drug makers may compete with Prozac, Eli Lilly’s key drug, as early as next year.
Lilly plunged $31.55 to $77 on volume of more than 22 million shares after trading resumed following a long halt.
Among other major drug companies, Merck fell $1.80 to $70.56 and Johnson & Johnson lost $1.86 to $94.81. Both are in the Dow.
But what was bad for Lilly was good for Barr Labs, which wants to make a generic version of Prozac. Barr soared $30.25 to $76.
In the market, overall winners and losers were nearly even on the New York Stock Exchange while losers had a 21-to-19 edge on Nasdaq in moderate trading.
The Nasdaq composite gained 4.95 points to 3,853.50, boosted by computer networker Cisco Systems in the wake of its strong earnings report Tuesday. Cisco surged $2.31 to $67.81.
Cisco’s quarterly revenue jumped 61%, higher than expected.
Still, Nasdaq pulled back from a peak of 3,936 on Wednesday.
In commodity markets, near-term crude oil futures jumped $1.23 to $30.35 a barrel as traders reacted to Tuesday’s data showing another decline in U.S. crude inventories.
In the bond market, yields were mostly flat, showing little reaction to the Federal Reserve’s report on regional economic activity.
The report “supports the argument for no Fed rate rise at the meeting this month,” said Richard Yamarone, senior economist at Argus Research. “There’s solid economic growth with scant signs of inflation and the Fed would be hard-pressed to raise rates.”
The government sold $10 billion in new 10-year T-notes at a yield of 5.84%, slightly above expectations.
Among Wednesday’s highlights:
* In the drug sector, Pfizer slid $2.17 to $42.75 and American Home Products lost $2.25 to $55.88. Also, Forest Labs plunged $24.98 to $89.50 amid concerns that its antidepressant, Celexa, also could be vulnerable to generic competition.
Sepracor slumped $23.38 to $106.13. Lilly has a licensing agreement to develop Sepracor’s variation of Prozac.
* Wal-Mart slid $4 to $53.63 in the wake of its warning about near-term earnings, which the company said would miss expectations because of a change in accounting.
* In the tech sector, Intel rose $1.94 to $63.56, Micron Technology jumped $4.88 to $81.75 and National Semiconductor rose $2.06 to $35.31 amid a general rebound in chip stocks.
But many Internet names were weak. Inktomi dropped $9.56 to $104.56 and CMGI slid $3.69 to $36.69.
Brokerage Sanford Bernstein opened coverage of Amazon.com with a rating of “underperform,” meaning the analyst doesn’t expect Amazon’s stock to perform as well as the broader market. Amazon’s shares fell $2.06 to $30.88.
* Many industrial and utility stocks, strong in recent days, lost ground overall. The Dow utility index fell 0.9%.
* Energy stocks gained with oil. Chevron rose $2.23 to $82.59 and Anadarko leaped $2.38 to $52.75.
Market Roundup: C11, C12
