1 Reason for the Dow's Monday Tank Job
The markets didn't just get up on the wrong side of the bed today; they face-planted on the floor. This isn't just "another case of the Mondays." Spain officially requested $77 billion to stabilize its financial institutions.
Still, this Spanish bailout was already a fait accompli. I wrote about Spain's banking sector dining on TARP tapas two weeks ago, when the eurozone countries offered up to $125 billion in rescue loans for the embattled nation. Banco Santander (NYS: SAN) was down 3% that day, and has plunged more than 5% today. Interest on Spanish debt has since topped 7%, and this mini-bailout may just kick the can down the road, but I'm a little stunned at the broad sell-off for a widely expected action that will increase solvency in the short run.
That said, let's take a closer look at how the three major indexes are faring.
|Dow Jones Industrial Average (INDEX: ^DJI)||(143.80)||(1.14%)||12,496.98|
Source: Yahoo! Finance as of 1:35 p.m.
The major U.S. indexes are all losing ground with the Nasdaq suffering the steepest plunge. The market's "fear index" is back in a big way; the VIX (INDEX: ^VIX) is jumping up more than 15% today. On the Dow, the financial components are taking the worst beating in aggregate, but significant pressure is hitting the commodity companies as well. All but one Dow component, Wal-Mart, is in negative territory.
Despite shares being off only 1%, the Dow component suffering the worst news today is Pfizer (NYS: PFE) , which saw its drug Eliquis rejected by the FDA. Pfizer shares the blood-thinner with Bristol-Myers Squibb (NYS: BMY) , down 4%, and this rejection is a setback for the potential blockbuster. During clinical trials, Eliquis topped its competitors, and was expected to generate billions by capturing a large slice of the atrial fibrillation market. The two pharmas need a hit after losing flagship drugs Lipitor and Plavix to patent expiration within the last year.
The companies are confidently hoping for a swift resubmission, but it may be 2013 before the FDA reviews whatever additional information they requested and potentially approves the drug.
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The article 1 Reason for the Dow's Monday Tank Job originally appeared on Fool.com.Fool contributor David Williamson owns shares of Pfizer, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Pfizer. Motley Fool newsletter services have recommended creating a diagonal call position in Wal-Mart Stores. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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