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Merck, Lexmark news
sends stocks falling
NEW YORK >> Uneasy following downbeat earnings from Merck and Lexmark International, investors sold off stocks yesterday to lock in profits from Friday's rally. Prices on Wall Street fell sharply.
The downward pressure came despite better-than-expected earnings and an encouraging outlook from 3M, indicating that investors on the whole are less impressed with second-quarter results than they were with those of the first quarter, which prompted huge rallies.
Analysts also attributed the declines to the market having climbed too high, too fast.
"All this is about is the market has gone very far over the last 16 weeks, specifically the Nasdaq (composite index). It has to pull back. ... I think all that has happened here is the market is just pooped out," said Gary Kaltbaum, president of Investors' Edge Partners, a money management firm in Orlando, Fla.
The Dow Jones industrial average closed down 91.46, or 1 percent, at 9,096.69. The loss wiped out much of Friday's 137.33-point gain.
The broader market also retreated. The Nasdaq dropped 27.09, or 1.6 percent, to 1,681.41. The Standard & Poor's 500 index declined 14.52, or 1.5 percent, to 978.80.
Declining issues outnumbered advancers slightly more than 5 to 2 on the New York Stock Exchange. Consolidated volume was light at 1.55 billion shares, below Friday's already thin 1.67 billion.
The Russell 2000 index, which tracks smaller company stocks, fell 7.59, or 1.6 percent, to 457.17. The NYSE composite index dropped 71.65 to 5,483.61. The American Stock Exchange composite index slipped 3.07 to 947.30.
Yesterday's economic data met economists' expectations. The Conference Board reported that its Index of Leading Economic Indicators advanced for a third month, rising by 0.1 percent in June. The index gauges what the economic conditions are likely to be in the upcoming three to six months.
Earnings reports yesterday were mixed, but investors seemed to focus on those that were disappointing.
"There is this feeling that because of the great run we have already had that some of the good news has been built into the market," said Robert Froelich, chief investment strategist for Deutsche Asset Management in Chicago.
The Dow's biggest loser was Merck, which dropped $1.95 to $59.82 after missing earnings expectations by a penny a share. Merck's news affected other drug makers, with Lilly falling $1.04 to $66.14 and Pfizer declining 85 cents to $32.54.
Printer maker Lexmark slid $14.10, or 19.2 percent, to $59.40, having also missed earnings estimates by a penny and having cut its third-quarter outlook. Rival Canon also traded lower, declining $1.29 to $45.86.
3M climbed $6.17 to $136.35 after reporting that second-quarter profits beat analysts' forecast by 5 cents a share.
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