Why Goldman Sachs and Pfizer Held Back the Dow Tuesday

On Tuesday, the Dow Jones Industrials (DJINDICES: ^DJI  ) broke its losing streak, although its gain of just 10 points did little to erase the more than 325 points the Dow had lost on Friday and Monday. Even though broader market measures posted more substantial gains today, the Dow had to overcome negative influences from Goldman Sachs (NYSE: GS  ) and Pfizer (NYSE: PFE  ) , both of which dropped more than 1% Tuesday.

Goldman Sachs was just one of several big U.S. banks that face the specter of tougher regulation, with various regulators looking to impose a higher 5% minimum capital requirement on Goldman and seven other lenders. Proponents argue that having systemically important institutions maintain higher levels of capital could help prevent a future financial crisis. But the cost of the new requirement is less leverage for Goldman Sachs, and that in turn could hurt its ability to produce stronger profit growth in the future. The move is just the latest in the series of challenges that Goldman Sachs will have to overcome in order to catch up to its pre-crisis growth prospects, and in particular, Goldman's unique reputation as a Wall Street institution leaves it vulnerable to onerous restrictions that will nevertheless command popular appeal among those who blame the institution for the financial crisis. Given the stock's high price, Goldman also has a big influence on the Dow Jones Industrial Average, and that could make it harder for the Dow to rebound.

Pfizer's decline came on the heels of an even larger drop Monday, but today, the drug giant had to deal with a study that found that customers who used Viagra had a greater likelihood of developing melanoma. The study, which was published in a prestigious medical journal, found no link between Viagra and other types of skin cancer, and researchers emphasized that this early stage study is far from conclusive on the issue. Yet the researchers tried to control for different factors, including sun exposure and family history, and nevertheless found an 84% greater likelihood of developing melanoma. It's far too early to assess potential legal liability even if the study is confirmed, but bad news for one of Pfizer's most famous drugs reflects negatively on the company in many people's eyes.

Looking forward, the Dow Jones Industrials will have to keep getting good news in order to rebuild what had looked like momentum for a record-setting run. Unless that happens soon, some short-term traders will see the failure of the Dow Jones Industrials to reach new all-time highs as a sign of market weakness. That could make the Dow's recent pullback look tiny by comparison.

3 stocks poised to be multibaggers
The one sure way to get wealthy is to invest in a groundbreaking company that goes on to dominate a multibillion-dollar industry. Our analysts have found multibagger stocks time and again. And now they think they've done it again with three stock picks that they believe could generate the same type of phenomenal returns. They've revealed these picks in a new free report that you can download instantly by clicking here now.


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

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: 2907957, ~/Articles/ArticleHandler.aspx, 8/20/2014 3:08:14 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