Why Merck's Dragging on the Dow This Morning


As global as the economy has become in recent years, markets around the world don't always trade in lockstep. A surge of nearly 4% in Japan's stock market would typically bode well for stocks elsewhere, but political concerns about troubled areas of Europe and fears that competitive currency-devaluation will lead to tension among the world's leading economies helped to dampen enthusiasm. The Dow Jones Industrials have fallen about 27 points as of 10:50 a.m. EST, with other major U.S. benchmarks experiencing similar percentage losses.

Merck is among the biggest losers on the Dow, falling 1% after the company lost an important lawsuit over its osteoporosis drug Fosamax. A jury in a federal court case ruled in favor of a plaintiff who alleged that Merck's failure to warn doctors about the drug's risks led to delays in healing and further injury. The $285,000 award is insignificant in itself, but with 4,000 similar lawsuits pending, the news could be a bad omen of things to come for the pharma giant.

Elsewhere, Infinera plunged nearly 7% despite posting a modestly smaller-than-expected loss and matching revenue expectations in its fourth-quarter earnings release last night. Given the stock's huge run lately -- shares had been up more than 70% since mid-November before today's drop -- it's likely that investors simply wanted more than the digital optical-networking company provided in terms of both past results and future guidance.

Finally, Goodrich Petroleum surged 20% after reporting that a well in the Tuscaloosa Marine area of Mississippi has seen improved production rates. Even though Goodrich shares working interests on the well with Encana and Contango Oil & Gas, the results are still extremely promising, given Goodrich's substantial holdings in the area. Goodrich now expects to spend more on capital expenditures to develop those holdings in hope of maximizing potential revenue.

Is Merck facing more legal battles ahead?
Merck has had to deal with big litigation before: Its Vioxx drug cost the company billions in settlements. Will Fosamax cause similar problems for the company? Find out about Merck's hot prospects and biggest risks by reading our premium research report on the company, which details whether Merck is a buy at current levels. Our senior biotech analyst, Brian Orelli, Ph.D., walks you through both the opportunities and the threats facing Merck. The report also comes with a full 12 months of updates, so claim your copy now by clicking here.

The article Why Merck's Dragging on the Dow This Morning originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Infinera. The Motley Fool owns shares of Infinera. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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