Surprise Pfizer announcement weighs on stocks

Pfizer’s surprise announcement of possible health risks connected with its Celebrex drug pushed stocks lower in heavy trading on Wall Street today, renewing investors’ concerns over the pharmaceutical sector.

The three major indexes finished the week higher.

Wall Street drove Pfizer to a nearly seven-year low after the Dow component announced that a new study showed people taking high doses of Celebrex, the best-selling arthritis drug, had an increased risk of heart troubles.

A similar revelation led to the removal of Merck & Co’s competing Vioxx drug earlier this year – and led to a major selloff of Merck shares. Pfizer said it will leave Celebrex on the market.

Despite moderate losses during the session, analysts remained bullish on the overall market.

“The nice thing about this market is that you may get a selloff of Pfizer, but the rest of the market behaves incredibly well,” said Mark Bronzo, managing director of Gartmore Separate Accounts LLC. “The market’s acting like people want to be in it.

So when you get something like this, people find other places to put their money and don’t just sell everything.”

The Dow Jones industrial average fell 55.72, or 0.52%, to 10,649.92.

Broader stock indicators also fell. The Standard & Poor’s 500 index was down 8.99, or 0.75%, at 1,194.22, and the Nasdaq composite index lost 10.95, or 0.51%, to 2,135.20.

Stocks managed moderate gains during the week despite a sharp climb in oil prices.

Investors were cheered by the Federal Reserve’s positive statement on the economy, which came alongside Tuesday’s quarter %age point interest rate hike.

For the week, the Dow gained 106.70, or 1.01%; the S&P was up 6.22, or 0.52%; and the Nasdaq climbed 7.13, or 0.34 %. Stocks have been up six of the last eight weeks.

Pfizer’s announcement drew attention away from the Labour Department’s consumer price index report for November. The CPI rose 0.2% in November, coming off a 0.6% rise in October. “Core” CPI – excluding food and fuel costs, which vary greatly – also rose 0.2% for November.

The results were in line with Wall Street’s forecasts, and show that inflation isn’t a major factor in the economy.

The markets were volatile due to a “quadruple-witching” day on Wall Street - the quarterly expiration of index futures and options, as well as individual stock futures and options.

Stocks can vary widely and trade quickly on heavy volume as investors cash in their options or futures and sign up for new contracts.

Stocks also saw pressure from crude oil futures, which shot past US$46 (€34.56) per barrel on concerns about higher demand due to a colder-than-expected winter. A barrel of light crude settled at US$46.28 (€34.76), up US$2.10 (€1.58), on the New York Mercantile Exchange.

The pharmaceutical sector has been under intense pressure since Merck’s September 30 announcement that it would pull Vioxx from the market due to increased risk of heart attack and stroke found among its users.

At the time, Pfizer maintained Celebrex was safe, but investors began to worry that hidden health problems, whether overlooked by drug companies or the US Food and Drug Administration, could derail any number of top-selling prescription drugs.

“Drug stocks are growth stocks without any growth prospects,” said Russ Koesterich, US equity strategist at State Street Corp. in Boston. “You look at the pipeline of future products – there are no pipelines. They’re coming under pricing pressure from the government. There’s generic competition. Why buy the stocks?”

After the Celebrex announcement, shares of Pfizer fell US$3.23 (€2.43), or 11.2%, to US$25.75 (€19.34) – the stock’s lowest close since January 16, 1998.

The stock had fallen as low as US$21.99 (€16.51)shortly after it began trading, but recovered slowly through the rest of session. More than 285 million shares of Pfizer traded hands, nearly nine times the average daily volume of 33 million shares.

Declining issues barely outnumbered advancers on the New York Stock Exchange, where volume came to 2.32 billion shares, compared to 1.79 billion on Thursday.

The Russell 2000 index of smaller companies was down 0.15, or 0.02%, at 642.08.