Merck Takes a Hit as the Dow Stays Flat

Stock investors ignored some positive news on the economic front this morning, instead seeing the lack of progress on fiscal-cliff negotiations as a reason to keep stocks in a holding pattern. Even an upward revision of U.S. GDP growth to a 3.1% annual rate during the third quarter and a nearly 6% rise in existing-home sales weren't enough to produce substantial gains: The Dow Jones Industrials are up about four points as of 10:55 a.m. EST. Broader market measures are mixed.

Merck is the biggest decliner in the Dow, falling almost 2.5% after the company announced a failure in a trial of its Cordaptive cholesterol drug. The study had hoped to show that a therapy combining high doses of niacin with another drug called laropiprant would raise favorable HDL cholesterol levels while reducing levels of unhealthy LDL cholesterol. With the failure, Merck said it won't try to get approval for the drug in the U.S., and even though the FDA first rejected the drug back in 2008, it has already gained approval in Europe. Abbott Labs gained slightly on the news, although analysts seem mixed on whether its Niaspan high-dose niacin drug should benefit or be hurt by Merck's results.

General Electric is up by more than 1.6%, with a report from Bernstein Research arguing that the industrial conglomerate will likely once again enjoy an extremely low effective tax rate. Although the company's tax cost management is obviously a plus for investors, it has also raised the ire of those who believe corporations use tax shelters and other questionable strategies to pay an unfairly low amount of tax. Given its size, GE stands to gain a lot if corporate-tax reform eventually makes its way through the legislative process.

Finally, Bank of America has gained 1.8%. The bank reportedly held back on plans to reduce incentives for certain Merrill Lynch brokers, with CEO Brian Moynihan choosing not to cut commission-sharing for low-revenue-generating brokers by two percentage points. According to Bloomberg, the changes would have affected two-thirds of the brokerage firm, and with Moynihan counting on Merrill to help drive growth, cutting compensation would have jeopardized retention.

Can Merck bounce back?
Merck's news on Cordaptive is a setback in its attempts to overcome its patent cliff and find new blockbuster drugs. To learn more about all the other prospects Merck has in its pipeline, turn to the Fool's in-depth research report on the stock. Inside, our senior health care analyst shares his views on whether Merck is a buy today, walking you through both the opportunities and threats facing Merck. Even better, the report comes with a full 12 months of updates. Claim your copy now by clicking here.

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