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Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.
After a slow start this morning, the Dow Jones Industrial Average (DJINDICES: ^DJI ) picked up steam to finish in positive territory for the third day in a row, as hopes for a compromise to end the fiscal standoff rose again. The blue chips finished up 64 points, or 0.4%, closing at 15,301, less than 400 points from its all-time high.
This afternoon, Senate Majority Leader Harry Reid said he expected a deal to be worked out this week to avert a default and reopen the government, as legislators are moving toward an agreement that would raise the borrowing limit to last until February and fund the government until January. The deal would also maintain the across-the-board spending cuts, known as sequestration, that went into effect last March. While the pending agreement may seem like just the latest edition of congressional kick-the-can, it does provide for further budget talks so that Congress can hopefully avoid approaching the next incarnation of the fiscal cliff.
Pfizer (NYSE: PFE ) led the Dow stocks today, gaining 2.2% after seemingly positive results came out on its Xeljanz arthritis drug. The pharma giant said new studies show that the drug is effective in treating psoriasis, though the data showed that lower doses were not as effective as its current psoriasis treatment, Enbrel, prompting questions its efficacy. Analysts expect Xeljanz sales to peak at $2 billion a year, though that's a relative drop in the bucket for a company with nearly $60 billion in sales last year.
Rival Merck (NYSE: MRK ) , meanwhile, was the worst performer on the Dow today, falling 1.1% after getting a downgrade from outperform to market perform. The downgrade follows a similar disappointment last week, when Credit Suisse started coverage on Merck as a hold but gave Pfizer a buy. Bernstein analyst Tim Anderson today cited Merck's middling long-term growth prospects and poor R&D in recent years as justifications for the downgrade.
While Merck and Pfizer are two of the cheaper stocks on the Dow, both companies face declining revenues, patent cliffs, and potential setbacks from the new health-care law, which gives favored treatment to generic drugs.
Outside the Dow, Netflix (NASDAQ: NFLX ) shares spiked 8% after striking a deal with Sony and reports saying that it was close to deals with several cable providers. The leading home video entertainer said Sony will produce an exclusive series for Netflix, a first for the company that dove into original series earlier this year with House of Cards. More importantly, Netflix is in talks, according to The Wall Street Journal, with cable companies including Comcast and Cox to be included in set-top cable boxes, a potential watershed moment for the video streamer.
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