Dow Declines 114 Points Amid Oil, Drug Fears
Investors sent stocks sharply lower Thursday as oil prices continued their climb higher and new questions about the safety of arthritis drugs pressured pharmaceutical stocks.
Uninspiring September retail sales contributed to the malaise ahead of today’s key report on September employment trends.
Investors were newly uneasy about drug stocks after a scientific study showed that Pfizer’s Celebrex could cause cardiovascular problems similar to those caused by Merck’s Vioxx, which was pulled from the market last week after Merck found a heightened risk of heart attack. The news fed selling in the rest of the drug sector.
Investors also bid stocks lower as oil prices rose again, with production problems in Russia, Nigeria and the Gulf of Mexico combining to spark another wave of speculation. A barrel of crude oil settled at $52.67, up 65 cents, in New York trading.
“Oil continues to be the big story here, and it’s going to be hard for the markets to break out of a range while this continues to be a problem,” said Joseph Battipaglia, chief investment officer at Ryan Beck & Co. “It adds to the uncertainty in the market over earnings and the election.”
The Dow Jones industrial average fell 114.52 points, or 1.1%, to 10,125.40.
Broader stock indicators were also sharply lower. The Standard & Poor’s 500 index was down 11.40 points, or 1%, at 1,130.65, and the Nasdaq composite index lost 22.51 points, or 1.1%, to 1,948.52.
Declining issues outnumbered advancers by about 3 to 1 on the New York Stock Exchange.
Investors’ concerns about the economy were assuaged somewhat as the Labor Department reported a steep drop in first-time unemployment claims. The number of new jobless claims dropped last week by 37,000 to 335,000, the lowest level since the beginning of September. Wall Street had been expecting 355,000 claims for the week.
The news pushed yields on U.S. Treasury bonds to one-month highs. The yield on the benchmark 10-year Treasury note rose to 4.24%, from 4.22% on Thursday.
The big test for employment, however, will come today, when the Labor Department issues its monthly jobs creation report. With the report carrying a great deal of weight on Wall Street, some investors were keeping to the sidelines Thursday.
In other market highlights:
* Drug stocks dropped as the New England Journal of Medicine reported its findings on the possibility of cardiovascular risks connected to Pfizer’s Celebrex. Pfizer, which had risen after Merck pulled Vioxx from the market last week, slumped $1.19 to $29.99, while Merck dropped 69 cents to $30.98. Both stocks are in the Dow index.
Other drug makers also fell as investors worried that their products would also face more intense scientific scrutiny. Eli Lilly slid $1.91 to $59.56, Abbott Labs lost 87 cents to $41.33, Alcon fell $2.52 to $75.18 and Johnson & Johnson dropped $1.83 to $55.92.
* Retail stocks were mixed amid the companies’ reports on September sales, and on concern that higher oil prices will crimp future spending. Wal-Mart lost 43 cents to $53.55 after saying sales at stores open at least a year rose 2.4% in September, the slowest gain in 15 months. Ann Taylor slid $1.84 to $21.80 and Kohl’s lost 54 cents to $49.46.
But Nordstrom surged $1.43 to $40.48 on its sales report. Abercrombie & Fitch’s report drove its shares up $3.09 to $35.09.
* Home builders, which saw shares decline early this week on concerns of weakness in the Las Vegas market, continued their fall. Pulte Homes was down $2.93 to $50.55, KB Homes lost $2.92 to $78.64 and Lennar sank $1.82 to $43.23.
Newport Beach-based William Lyon Homes said after the market closed that new home orders fell 33% in the third quarter. Its stock was down $2.12 to $81.26 in regular trading.
* Corning slumped 85 cents to $10.50. The world’s largest maker of glass used in flat-panel televisions said it would take a charge of up to $2.9 billion in the third quarter, mostly to reflect the reduced value of assets at its phone-company supply business.
* Airline stocks tumbled as oil prices hit a record high. Delta slid 40 cents to $3.45, Alaska Air fell 69 cents to $24.65 and Continental lost 38 cents to $8.53.
* Among new stock issues, Thomas Properties Group, a Los Angeles-based commercial real estate firm, rose 6 cents to $12.06 in its first day of trading. The company’s portfolio includes the Arco Plaza in downtown Los Angeles.
