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Why Pfizer Will Move the Dow Monday

On Friday, the Dow Jones Industrials (DJINDICES: ^DJI  ) started out the day in record territory, with a big surge in April employment creating positive economic momentum for the stock market. But news that Russian President Vladimir Putin had called for a meeting of the U.N. Security Council took the steam out of the Dow, and by the end of the day the average had fallen 46 points for its second-straight decline. Still, next week will feature earnings news from Pfizer (NYSE: PFE  ) , and investors will look to see if the pharma giant will offer a different reading on the health-care space than other pharmaceutical companies in the Dow that reported last month.

Pfizer will report its results before the market opens Monday morning. While the company didn't specify a specific time, investors expect to see results at around 7 a.m. EDT based on previous quarterly releases. Pfizer has scheduled its earnings conference call for 10 a.m. EDT, and its comments could move the stock and the Dow Jones Industrials.

Pfizer presents an interesting case for investors this quarter, because it's going through the major distraction of a merger attempt. From the standpoint of pure financial performance, the company has struggled to rebound after losing revenue from its blockbuster Lipitor drug to generic competition. Investors expect a modest climb in earnings but continued weakness in revenue, as Pfizer tries to build up sales of other budding blockbuster drugs and develop its pipeline of experimental-stage treatments.

Yet Pfizer has a deal on the table to spend more than $100 billion on a merger that would bolster its leadership position in the global pharmaceutical industry. Pfizer's target has been reluctant to agree to a merger, and even after raising its bid slightly, Pfizer was once again rebuffed on Friday. But the company believes the potential for cost-saving synergies and pipeline coordination might well be worth the effort to persuade its target to accept its advances.

In many ways, what happens with Pfizer earnings is probably less important from the perspective of influencing the Dow Jones Industrials than what happens with its merger attempt. If it can consummate a deal, Pfizer could prove that even mammoth mergers and acquisitions are still fair game, and that in turn could get investors more excited about large-cap stocks in a variety of industries with benefits to be gained from consolidation.

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Dan Caplinger

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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9/2/2015 4:36 PM
^DJI $16351.38 Up +293.03 +1.82%
PFE $31.97 Up +0.61 +1.95%
Pfizer CAPS Rating: ****