U.S. Stocks Fall on Oil Price Concern; Shares of Biogen Tumble

Feb. 28 (Bloomberg) -- U.S. stocks fell after Biogen Idec Inc. suspended sales of its multiple-sclerosis drug and Banc of America recommended investors sell their shares of General Motors Corp. and Ford Motor Co.

Benchmark indexes also dropped as oil prices climbed to near $52 a barrel and a government index on inflation rose by the most in two years.

``Biogen is a pretty major biotech stock, and having a stock like that down 40 percent puts a pall over the market,'' said David Straus, who helps manage $160 million at Johnston Lemon Asset Management in Washington. ``Oil prices are up around $50 or so, and inflation's still pretty well contained but still creeping higher. That's the negative backdrop.''

The Standard & Poor's 500 Index lost 4.87, or 0.4 percent, to 1206.50 as of 3:40 p.m. in New York. Biogen, which sells its MS drug with Irish partner Elan Corp., tumbled 45 percent for the steepest drop in the benchmark.

The Dow Jones Industrial Average slid 37.30, or 0.3 percent, to 10,804.30. The Nasdaq Composite Index retreated 11.29, or 0.6 percent, to 2054.11. All three indexes are headed for their first decline in four days.

About five stocks fell for every three that rose on the New York Stock Exchange. Some 1.4 billion shares changed hands on the Big Board, 33 percent more than the same time two weeks ago.

For the month, the S&P 500 has gained 2 percent, erasing most of its January losses. The Dow has added 2.8 percent after falling 2.7 percent last month. The Nasdaq is down 0.6 percent following a 5.2 percent drop in January.

Oil

Oil for April delivery rose as high as $52.28 a barrel in New York as a snowstorm approaching the U.S. Northeast may stoke heating-fuel demand. Prices ended up 0.5 percent at $51.75.

``You look at where the market's come this year, and essentially we've tread water,'' said Hans Olsen, who oversees $2 billion as chief investment officer at Bingham Legg Advisers LLC in Boston. ``If you have both stubbornly high oil prices and a continuing decline in the dollar, it's going to make it very difficult for the market to do well.''

The U.S. dollar today fell to the lowest in almost seven weeks against the euro, heading for a sixth month of declines in the past seven. A weaker dollar reduces the value of U.S. assets for foreign investors.

Biogen Tumbles

Biogen slumped $30.29 to $36.99. The No. 3 U.S. biotechnology company and Elan suspended sales of their Tysabri drug after one patient died. Tysabri, the first new type of drug in eight years to treat MS, won U.S. approval in November and analysts had said its sales might eventually exceed $3 billion. Elan's U.S. shares plunged $18.06, or 67 percent, to $8.84.

Biogen has been the best performer among current S&P 500 members in the past decade. Teva Pharmaceutical Industries Ltd., which makes a competing MS treatment, jumped $2.47 to $30.03.

An S&P 500 measure of pharmaceutical and biotechnology shares slid 2.1 percent and was the biggest drag on the benchmark. Amgen Inc., the world's biggest biotechnology company, dropped $1.41 to $61.40.

GM and Ford Motor Co. declined after Banc of America Securities analyst Ronald Tadross downgraded the pair to ``sell'' from ``neutral'' because new products haven't stopped U.S. market share losses.

The two are expected to report tomorrow that February U.S. sales dropped as record rebates failed to attract more customers and Asian competitors gained market share with new models. GM lost $1.80 to $35.09. Ford retreated 48 cents to $12.52.

Spending, Inflation

U.S. personal spending was unchanged in January after rising a month earlier, the Commerce Department said. The median estimate of economists in a Bloomberg News survey was a 0.1 percent increase. Incomes fell 2.3 percent.

The report's index of prices consumers paid for goods and services other than food and energy climbed 0.3 percent, the biggest increase since December 2002, after no change a month earlier. The gauge is tracked by Federal Reserve policy makers.

Separately, the government said U.S. new home sales unexpectedly fell 9.2 percent to a 1.106 million annual rate in January. Taken together, the two reports suggest the U.S. economy will get less of a boost from consumers in the first quarter.

M&A

Shares of Mylan Laboratories Inc. and Federated Department Stores Inc. were active after merger and acquisitions announcements.

Mylan, the generic-drug maker that pursued a takeover of King Pharmaceuticals Inc. for six months, abandoned the proposed $4 billion transaction yesterday, a victory for now for billionaire financier Carl Icahn. Mylan gained 50 cents to $17.44. King declined 77 cents to $9.48.

The companies were ``not able to agree upon terms for a revised transaction,'' Mylan and King said in a statement last night. Icahn, Mylan's second-biggest shareholder, in September had called the price ``ridiculous.''

Federated, the owner of Macy's and Bloomingdale's, slid 73 cents to $56.06 after earlier climbing as high as $58.11. The company agreed to buy May Department Stores Co. for about $11 billion, marking the biggest retail acquisition since Kmart Holding Corp.'s purchase of Sears, Roebuck & Co. in November. May dropped 83 cents to $34.52.

Rival department-store chain Dillard's Inc. slid $1.45 to $23. The company will be subject to more competition because of Federated's acquisition of May, Oppenheimer & Co. analyst Bernard Sosnick wrote in a note. He cut Dillard's to ``sell'' from ``neutral.''

AIG

American International Group Inc. declined $1.88 to $66.47. New York State Attorney General Eliot Spitzer widened his investigation of AIG, the world's largest insurer, to include the company's relationship with specialist insurance company CV Starr, the Financial Times reported over the weekend. CV Starr is majority-owned by AIG executives, the FT said.

A measure of insurance companies dropped 1.6 percent.

Tiffany & Co., the No. 1 U.S. luxury jewelry retailer, slid 78 cents to $30.14. ``Challenging conditions'' in Japan, the company's second-biggest market after the U.S., will push first- quarter earnings below the 25 cents Tiffany earned in the same period in 2004, the company said. Analysts surveyed by Thomson Financial expect Tiffany to earn 27 cents a share, on average.

Best Buy Co. increased $2.37 to $54.06 after J.P. Morgan Securities Inc. analyst Stephen Chick raised his rating on the No. 1 U.S. electronics retailer to ``overweight'' from ``underweight.'' Best Buy should be able to maintain ``double- digit'' earnings growth as it spends the $8 a share in cash it has accumulated on share buybacks, Chick said in a note.

To contact the reporter on this story: Dune Lawrence in New York at dlawrence6@bloomberg.net.

To contact the editor responsible for this story: John Melloy at jmelloy@bloomberg.net.