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Drugmakers pull markets lower; small companies’ stocks surge

New York Stock Exchange
This 2015 file photo shows the New York Stock Exchange.
(Seth Wenig / Associated Press)

Major U.S. stock indexes slipped Friday as drug companies dragged the market lower. Small-company stocks bucked the downward trend and continued to climb, and bond yields rose to their highest level in a year.

Drugmakers such as Merck and biotech company Amgen took some of the biggest losses Friday. Weak results from Gap and Abercrombie & Fitch hurt retailers as investors kept a close eye on the upcoming holiday season.

Small companies including regional banks continued to make large gains. Those stocks have risen sharply since the presidential election last week and are now at record highs.

“Some of the proposals that [President-elect Donald] Trump has promoted, specifically deregulation and also some of his trade proposals, are better for small companies than potentially they are for large ones,” said Katie Nixon, chief investment officer for Northern Trust.

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The Dow Jones industrial average slid 35.89 points, or 0.2%, to 18,867.93. The Standard & Poor’s 500 index fell 5.22 points, or 0.2%, to 2,181.90. The Nasdaq composite touched a record high early in the day, then turned lower and closed down 12.46 points, or 0.2%, at 5,321.51.

That’s not a big loss, but the major indexes hadn’t fallen that much since before the presidential election. Still, the S&P 500 and Nasdaq finished substantially higher this week after their big gains the week before. But indexes of smaller companies, such as the Russell 2000 and the S&P 600, did better. They are on 11-day winning streaks and have hit all-time highs.

Among small-company stocks, mortgage lending service company LendingTree climbed 7.3% to $100 and coal miner Cloud Peak Energy rose 15.8% to $5.79.

Losses for drug companies weighed down healthcare stocks. Botox maker Allergan retreated 4.1% to $191.78 and Thousand Oaks biotech giant Amgen fell $2.13, or 1.4%, to $145.23. Hepatitis C drugmaker Gilead Sciences, based in Foster City, Calif., slipped 1.3% to $74.62.

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Drug company stocks are coming off their biggest weekly gain in two years. The stocks had been falling in the months leading up to the election because investors worried that under a Hillary Clinton presidency, the federal government would take steps to rein in drug prices. Those kinds of steps are less likely under a Trump presidency and a Republican-controlled Congress.

The dollar continued to climb. It’s near one-year highs against the euro and six-month highs against the yen. The dollar rose to 110.63 yen from 109.89 yen. The euro fell to $1.0599 from $1.0626.

The dollar hasn’t been this strong since early 2003. Nixon of Northern Trust said that’s affecting big multinational companies because it can hurt their sales outside the U.S., but it’s less of a problem for smaller, domestically oriented companies.

Investors continued to sell U.S. government bonds at a rapid clip, and bond prices wobbled and turned lower. The yield on the 10-year Treasury note rose to 2.34% from 2.30%. Bond prices have fallen hard since the election, and yields are now at their highest in a year.

Teen clothing company Abercrombie & Fitch plunged 13.8% to $14.60 after it reported weak sales and a smaller profit than analysts had expected. Gap shares sank 16.6% to $25.61 after it said fewer people visited its stores heading into the holiday season. Sporting goods Hibbett Sports retailer cut its annual forecasts after a weak third-quarter report, and shares fell 10.8% to $40.40.

Shoppers are not spending as much money on clothes and are moving toward discount chains. Ross Stores rose 3.8% to $68 after the discount retailer, based in Dublin, Calif., posted a larger-than-expected profit and better sales.

Companies that sell common household products moved lower. Procter & Gamble fell 1.3% to $82 and drugstore operator Walgreens Boots Alliance slipped 0.9% to $83.27. Those companies have fallen since the election as investors buy shares in companies that could benefit more from faster economic growth.

Salesforce.com rose 3.4% to $77.77 after the San Francisco maker of customer management software gave a solid quarterly report and issued strong guidance.

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Benchmark U.S. crude rose 27 cents to $45.69 a barrel. Brent crude, which is used to price international oils, rose 37 cents to $46.86 a barrel. Energy companies traded higher. Chevron rose 1% to $109.20 and ConocoPhillips jumped 2.6% to $44.76.

Gold fell $8.20 to $1,208.70 an ounce. Silver fell 15 cents to $16.62 an ounce. Copper slipped 2 cents to $2.47 a pound.

Wholesale gasoline stayed at $1.34 a gallon. Heating oil ticked up 1 cent to $1.46 a gallon. Natural gas climbed 14 cents, or 5.2%, to $2.84 per 1,000 cubic feet.

France’s CAC 40 fell 0.5% and the FTSE 100 in Britain slipped 0.3%. The German DAX lost 0.2%. Japan’s benchmark Nikkei 225 index rose 0.6% as the yen hit a six-month low, helping shares of the country’s big exporters. South Korea’s Kospi shed 0.3% and Hong Kong’s Hang Seng rose 0.4%.  

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UPDATES:

2:40 p.m.: This article was updated with closing prices, context and analyst comments. 

10:15 a.m.: This article was updated with new market information and context. 

This article was originally published at 7 a.m.


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