Investors sent US stocks sharply lower today as oil prices continued their climb higher and new questions about the safety of arthritis drugs hit pharmaceutical stocks.
The Dow Jones industrials, which include drug makers Pfizer and Merck, lost more than 114 points.
Uninspiring September retail sales contributed to the market’s malaise.
Investors were uneasy about drug stocks after a new scientific study showed that Pfizer’s Celebrex could cause cardiovascular problems similar to those caused by Merck’s Vioxx, which was withdrawn from the market last week after Merck found a heightened risk of heart attack and stroke. The news fed selling in the rest of the drug sector.
Investors also bid stocks lower as oil prices reached a record 53 per barrel in intraday trading, as production problems in Russia, Nigeria and the Gulf of Mexico combined to spark another wave of speculation. A barrel of crude oil settled at 52.67, up 65 cents, on the New York Mercantile Exchange.
“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, or 1.1%, to 10,125.40.
Broader stock indicators were also sharply lower. The Standard & Poor’s 500 index was down 11.40, or 15, at 1,130.65, and the Nasdaq composite index lost 22.51, or 1.1%, to 1,948.52.
Pharmaceutical 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.
Other drug manufacturers also fell as investors worried that their products would also face more intense scientific scrutiny. Eli Lilly slid 1.91 to 59.56, AstraZeneca lost 84 cents to 38.80, and GlaxoSmithKline fell 1.15 to 41.90.
“A lot of the weakness we’re seeing today has a lot to do with the drug stocks,” said Todd Leone, managing director of equity trading at SG Cowen Securities. “When you look at it, that’s been a key mover today, and they’re (Pfizer and Merck) both Dow components.”
A mediocre retail sales report for September led to new fears that rising oil prices would continue to limit consumer spending with the fourth-quarter’s all-important holiday shopping season coming up.
Results at most major retailers were mixed, with the biggest gains coming from clothes chain American Eagle Outfitters, which reported a 22.75% rise in same-store sales – sales at stores open at least a year. Talbots, also a clothing retailer, saw a 1.3% drop in same-store sales, which was actually better than the 4% drop Wall Street expected. American Eagle gained 20 cents to 37.62 on the news, while Talbots rose 20 cents to 25.99.
Costco climbed 1.72 to 44.65 after the company reported a 24% hike in earnings for the third quarter, beating Wall Street estimate by 4 cents per share. The bulk retailer also saw an 8% increase in same-store sales in September.
Investors’ concerns about the economy were eased somewhat as the Labour 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 big test for employment, however, will come tomorrow, when the Labour 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 today.
Bank of America said it would cut an additional 4,500 jobs as part of its integration with FleetBoston Financial Corporation, which it acquired earlier this year. Bank of America was up 18 cents at 45.43.
Hotel giant Marriott International fell 80 cents to 54.02 despite posting quarterly profits that surpassed analysts’ forecasts by a penny per share. The company cited strong demand and a rate increase for a 9% rise in quarterly revenue.
Declining issues outnumbered advancers by about 3 to 1 on the New York Stock Exchange, where volume totalled 1.45 billion shares, compared with 1.42 billion on Wednesday.
The Russell 2000 index of smaller companies was down 10.06, or 1.7%, at 582.60.