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.
The Dow Jones Industrial Average (DJINDICES: ^DJI ) is trading slightly higher at midday, posting a 16-point gain as of just after noon EDT as a mixed set of earnings reports kept the Dow from moving more sharply in one direction or the other. Merck (NYSE: MRK ) didn't participate in the Dow's gains, joining pharmaceutical peers Johnson & Johnson (NYSE: JNJ ) and Pfizer (NYSE: PFE ) with slight declines on the day.
Merck will release its third-quarter results before the market opens on Monday. It will follow up its release with a press conference scheduled to begin at 8 a.m. EDT.
Investors expect Merck's earnings to fall from year-ago levels, with more modest declines in revenue than the company has seen in past quarters. With patent protection having expired more than a year ago for its former blockbuster Singulair asthma medicine, Merck's sales slide should moderate in the quarters to come. But in the long run, Merck faces further patent-cliff expirations that could bring similar sales declines if it can't develop new high-sales drugs to replace them.
Merck's results will have implications for the entire Dow, given that both Pfizer and Johnson & Johnson have huge exposure to the pharmaceutical space. J&J's earnings results were driven higher by pharmaceuticals, with an 11% jump in pharma-segment revenue showing how hard the company has worked to deal with its own patent-cliff issues. By contrast, investors expect Pfizer to have many of the same issues as Merck, although Pfizer earnings are seen posting a slight year-over-year increase despite a big drop in sales.
Watch the dividend
Finally, Merck investors should look for a potential dividend increase. In each of the past two years, Merck has boosted its dividend in the fourth quarter of the calendar year, albeit by just a single penny last year. A failure to do so this year could indicate a lack of confidence in Merck's future, and that could have dire implications throughout the Dow on Monday.
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