Pfizer's Generic Split Buffers the Dow's Falling Financials

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) is kicking off the new week in the red as a disappointment from the flourishing housing sector pressures the markets. The blue-chip index is down 21 points as of 2:25 p.m. EDT, with most of its member stocks down for the day. The financial sector has borne the brunt of Wall Street's blows so far, but one pharmaceutical standout is saving the Dow from worse losses. Let's dive into the stories you need to know about today.

A slight dip in housing takes down the banks
Pending home sales contracted 0.4% for June, according to a report today from the National Association of Realtors. Rising mortgage rates have tempted some observers and analysts to back off from the rapid housing boom that has taken over 2013, as pending home sales are still up more than 10% for the year despite June's fall. Housing starts have done even better, gaining a whopping 24% year to date.

Still, financial stocks have fallen on the news, with Bank of America (NYSE: BAC  ) leading the way downward as shares dip 1.1%. B of A's on the right side of the Dow for the year, with the stock up more than 27% year to date, and today's drop isn't a danger to the big bank. B of A's mortgage department did show weakness last quarter, while its investment-banking unit led the way for the company's earnings. However, so long as the housing market continues its overall rebound, B of A should be just fine.

Surprisingly, the contraction in housing data hasn't hit shares of Home Depot (NYSE: HD  ) today, despite the big retailer's close ties to the sector's rebound. The company's shares have surged on housing's comeback, and caution regarding rising mortgage rates has helped slow that surge recently. Home Depot has put space between itself and its closest competitor, fellow home-improvement retailer Lowe's, even as both companies steam forward behind housing's bounce.

Today's biggest story on the Dow isn't about the housing market, however. Shares of big pharma Pfizer (NYSE: PFE  ) have jumped 1.8% to lead the sluggish index today after the company announced that it will split its generic- and branded-drug businesses into two operating segments. Pfizer's branded-drug business, responsible for blockbuster successes like cholesterol-fighting Lipitor, has long been the firm's growth driver, and it's squarely in investors' focus going forward.

What does the split mean? It could be the prelude to a spinoff of Pfizer's generics business in the near future. The company's leadership has consolidated operations recently, selling its infant nutrition business to Nestle last year in a nearly $12 billion sale. Pfizer then spun off its animal-health business, now Zoetis, earlier in the year. While the divestments have turned Pfizer into a smaller, more concentrated firm, the high margins and strong growth from branded-pharmaceutical sales have this company's future -- and the stock's future -- looking bright.

Pfizer's long-term approach to growth is a reminder of the most important maxim of investing: The best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.


Read/Post Comments (0) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2565152, ~/Articles/ArticleHandler.aspx, 9/17/2014 1:54:46 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement