Markets & Finance

Stocks End Sharply Lower


Stocks ended sharply lower Tuesday after the market was unable to sustain an earlier move higher. Weakness in biotech, pharmaceutical, and computer-related stocks pulled down the major averages. In the afternoon, a suicide bombing in Israel weighed on hopes for Mideast peace and only made matters worse.

The Dow Jones industrial average fell 128.14 points, or 1.33%, to 9,517.26, led by a decline in Merck (MRK). The tech-heavy Nasdaq composite index lost 33.51 points, or 2.19%, to 1,497.18. And the broader Standard & Poor's 500 Index was down 17.14 points, or 1.66%, to 1,013.60.

The market was restrained by a slide in Merck shares after Lehman Brothers downgraded the stock. Merck reiterated its EPS guidance for flat growth this year, and said it plans to refile an expanded NDA for Arcoxia with FDA in the second half of 2003.

Pharmaceuticals were also pressured on news that Abbott Labs (ABT) cut its guidance for 2002 EPS from operations to $2.06-$2.10, and for second quarter EPS to $0.49-$0.51. The company cited impacts related to consent decree with the FDA for quality problems at its Illinois plant, global market disruption of its antiobesity drug Meridia/Reductil, and foreign exchange translations.

But the weakest sector was biotech after Idec Pharmaceuticals (IDPH) halted trials of its IDEC-131 antibody drug due to safety concerns. It also said its Zevalin cancer drug wouldn't be reimbursed by Medicare until October, later than hoped.

Political tensions in the Middle East also cast a dark cloud. Israeli TV reported a suicide bomber in a restaurant near Tel Aviv. The stock market been extremely sensitive to ongoing tensions in the region.

In the morning, stocks staged a rally as investors embraced some upbeat earnings news. Nokia (NOK) shares jumped after it cut its sales forecast. Despite lower sales, though, the Finnish mobile phone maker maintained its EPS guidance of 0.18-0.20 euros. This guidance indicates handset margins sharply above 20%, well above industry average, says S&P.

And Nextel Communications (NXTL) gained after saying it's on-track to meet its 2002 guidance of at least $2.5 billion in EBITDA, and about 2 million new subscribers from domestic operations.

Managed health care stocks also rallied after Wellpoint Health (WLP) raised 2002 EPS guidance from $4.00 to $4.30, citing strong medical membership growth in key geographies.

However, positive comments from well-known market strategists Byron Wien, Ed Yardeni, and Tom McManus, each of whom considers the market to be undervalued, couldn't keep the sellers away.

Treasury Market

Treasuries recovered from early weakness to close near their highs for the day. With little else on which to focus, bonds tracked stocks all day.

On Wednesday, a report on import and export prices is due. S&P MMS expects import prices to post a 0.5% gain in May due to an 8% surge in petroleum prices. Excluding petroleum, import prices should be flat in May, as should export prices both with and without agricultural prices. The data will be used to fine tune second quarter GDP forecasts, but will have no impact on the markets, says S&P MMS.

World Markets

European markets ended with gains. In London, the Financial Times-Stock Exchange 100 index closed higher by 6.60 points, or 0.13%, to 4,934.80. UK industrial production rose 1.1% in April, the first increase in 8 months. But output was down 4.1% on a year-over-year basis.

In France, the CAC 40 jumped 84.43 points, or 2.1%, to 4,109.37. And in Germany, the DAX Index was up 16.83 points, or 0.37%, to 4,606.09, as German industrial production rose 0.2% in April, bolstering hopes for an economic recovery.

In Asia, the markets finished mixed. The Nikkei gained 79.23 points, or 0.70%, to close at 11,449.44 points as market players determined the slide over the past few days could not be justified in light of increasing signs of economic recovery. But investors were temperate in their enthusiasm amid uncertainties over corporate earnings and accounting.

In Hong Kong, the market fell 73.82 points, or 0.65%, to close at 11,215.02.


Coke's Big Fat Problem
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

Sponsored Financial Commentaries

Sponsored Links

Buy a link now!

 
blog comments powered by Disqus