The Dow Suffers Through Downward GDP Revisions as Merck, Pfizer Lead Decliners

Economic growth fears continued to be troublesome Tuesday, with the Dow's big pharma components helping to send the overall average lower.

May 6, 2014 at 12:31PM

The Dow Jones Industrials (DJINDICES:^DJI) was down 86 points as of 12:30 p.m. EDT. The most recent numbers on international trade as of March just came in; due to the differences between the Commerce Department's initial assumptions about trade data and the actual figures, many analysts reduced their estimates of final first-quarter U.S. GDP downward. With a range of -0.2% to -0.8% comparing unfavorably to the government's preliminary figure of +0.2%, the big question remains whether the economic hit was temporary due to the weather or symptomatic of longer-term issues. Leading the Dow downward this afternoon were Merck (NYSE:MRK) and Pfizer (NYSE:PFE), while energy stocks were relatively strong.

Mrk Vaccine

Source: Merck.

Merck dropped more than 2% after the drugmaker announced that it would sell its consumer drug division to Germany's Bayer for $14.2 billion in cash. The move is consistent with Merck's overall strategic direction in narrowing its scope to emphasize its prescription pharmaceutical division and vaccine production, which have been far more lucrative areas for the pharma industry and have much greater growth prospects. Shareholders should get roughly half of the proceeds from the sale in the form of stock buybacks, while Merck plans to spend the other half on research and development or on making acquisitions to bolster its pipeline prospects. Yet even though Merck also said that its MK-3475 advanced melanoma treatment received priority review designation, investors didn't respond favorably in the short term to the news, suggesting that shareholders want even more dramatic strategic moves in order to send the stock higher after good gains so far in 2014.


Pfizer fell 1.4% as the company continues to wrangle with its own merger and acquisition plans. So far, buyout target AstraZeneca has shown no signs of going down without a fight, with the British company arguing now that its long-term prospects are good and that shareholders should remain patient with the existing corporate structure rather than letting Pfizer reap the benefits with an opportunistic takeover bid. Pfizer shareholders initially liked the idea of a combination, but as it becomes clear that even a successful bid won't necessarily lead to a smooth transition, investors appear to be cooling to the idea. At this point, it's unclear what would persuade AstraZeneca to accept a bid, and that uncertainty isn't making Pfizer shareholders happy -- especially with so much in cost savings and tax benefits at stake.

Warren Buffett just bought nearly 9 million shares of this company
Imagine a company that rents a very specific and valuable piece of machinery for $41,000... per hour (that's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report details this company that already has over 50% market share. Just click HERE to discover more about this industry-leading stock... and join Buffett in his quest for a veritable landslide of profits!

Dan Caplinger and the Motley Fool have no position in the stocks mentioned in this article. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information