Stocks End Lower on Merck News
Stocks, unable to extend Friday's rally, instead ended lower on Monday. The onslaught of accounting scandals continued to depress investors' confidence.
The latest salvo: drugmaker Merck (MRK ), a Dow component, reported it booked revenue of approximately $12.4 billion from its pharmacy-benefits subsidiary Medco that the unit never actually collected. Shares of Merck lost more than 2%. However, the company said it would go ahead with Medco's planned public offering as early as this week.
Accounting scandals aside, second-quarter earnings reporting season began with a disappointing release from Alcoa (AA ), another Dow member. The giant aluminum producer reported second quarter profits that fell short of Wall Street expectations by one cent.
Also weighing on investor sentiment was a slide in the U.S. dollar vs. the Japanese yen.
In other corporate news, online auctioneer eBay Inc. (EBAY ) on Monday said it would buy PayPal (PYPL ) in a stock swap worth about $1.5 billion, bringing under its own roof the online payment system already used by many eBay customers, according to wire-service reports.
The Dow Jones industrial average lost 104.60 points, or 1.12%, to 9,274.90. The tech-heavy Nasdaq composite index dropped 42.68 points, or 2.95%, to 1,405.68. And the broader Standard & Poor's 500-stock index was off 12.05 points, or 1.22%, to 976.98.
Among the worst-performing groups on the session were software and pharmaceuticals, while tobacco and soft drink companies showed strength. In commodities, gold futures were higher, while oil futures were off.
Meanwhile in Washington, former top executives at WorldCom, now reeling from a $3.85 billion accounting debacle, refused to testify at a congressional hearing, according to news reports. Former CEO Bernard Ebbers exercised his constitutional right against self-incrimination before the U.S. House Financial Services Committee, which is probing the unraveling of the second-largest U.S. long-distance carrier.
U.S. Treasuries closed higher, amid weakness in equities.
On Tuesday, July 9, President Bush is expected to reveal plans for a crackdown on corporate misconduct with new criminal penalties, responding to a wave of accounting scandals that threatens to turn Bush's pro-business reputation into a liability, according to news reports. Bush will present his plan in a Wall Street speech aimed at restoring investor confidence shaken by accounting scandals at WorldCom, Enron, and other once high-flying firms.
European markets ended lower, taking a cue from U.S. equities and the Merck news. In London, the Financial Times-Stock Exchange 100 index lost 14.30 points, or 0.31%, to 4,601.30. In France, the CAC 40 was down 4.93 points, or 0.13%, to 3,858.35. And in Germany, the DAX Index was off 40.70 points, or 0.91%, to 4,442.33.
In Asia, the markets finished with losses. The Nikkei dropped 56.89 points, or 0.53%, to 10,769.20. In Hong Kong, the market was relatively flat, off 2.71 points, or 0.03%, to 10,803.45.
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