Dow 30 Stock Roundup: Pfizer Gains, Crimea, Biotech Stocks Drag Markets - Analyst Blog

The Dow has had a poor run this week, primarily due to a selloff in biotech stocks and the resurgence of concerns over Crimea. A House Committee Ruling sent biotech stocks into a downward spiral at the start of the week. Additionally, the possibility of further sanctions against Russia overshadowed positive economic reports. During the first four trading days, the Dow has lost marginally, by 0.08%.

Last Week's Performance

The Dow dropped 0.2% on Friday after a fall in biotech stocks and futures and options expiration. Biotech companies were affected after Democrats on the U.S. House Energy & Commerce Committee asked Gilead Sciences Inc. GILD to justify the $84,000 price tag on its new hepatitis C drug Sovaldi. Investors were also kept on the edge by recent developments in Crimea.

However, the Dow gained 1.5% over the week. Crimea's vote to join Russia was conducted peacefully and was overwhelmingly in favor of citizens wanting to be part of Russia. This had helped the benchmarks move up at the beginning of the week.

The Dow This Week

The blue chip index extended its losing run into Monday, ending 0.2% lower. Escalating tension over Crimea and another drop in the biotech stocks for the second straight day were the primary factors for these losses. Investors' confidence further dipped over growing concerns about China's economy. The day's encouraging domestic economic numbers failed to prevent the slide.

Markets ended higher on Tuesday after better-than-expected consumer confidence data boosted investor sentiment. Biotech stocks also helped to end the two-day losing streak. The positives offset any negative concerns emerging from data suggesting a drop in sales of new single-family houses in February and a fall in U.S. home prices in January. Consequently, the Dow gained 0.6%.

The Dow declined 0.6% on Wednesday, dragged down by declines in the Technology and Materials sectors. Possibilities of further sanctions on Russia intensified selling pressure post mid-afternoon. The day's initial gains, largely a result of encouraging durable orders numbers, were eroded by the end of the trading session.

The blue chip index dropped a meager 0.03% on Thursday after investors feared sooner-than-expected rate hikes from the Federal Reserve. Incidentally, the concerns emerged after the day's mixed economic reports on fourth quarter GDP and weekly unemployment benefits. Declines in financial and technology stocks also dragged the markets lower.

Components which Moved the Index

Cisco Systems, Inc. CSCO recently announced plans to invest $1 billion over the next two years to build the world's largest network facilitating cloud computing service. Cisco declared that it expects to partner with companies like online consultation provider WebEx, Australian service supplier Telstra, a large-scale technology provider, Ingram Micro and SAP, OnX Managed Services.

Such collaborations would help it to build and support the Cisco Cloud Services network and expand its data centers. Cisco's new service will be sold to consumers directly as well as through channel associates.

General Electric's GE business unit GE Intelligent Platforms recently signed an agreement with semiconductor firm NVIDIA NVDA for the incorporation of the NVIDIA Tegra K1 mobile processor in its products meant for embedded computing platforms.

The agreement establishes General Electric as a preferred provider of the Tegra K1 to bring high performance embedded computing (HPEC) solutions to the increasingly growing market for Size weight and Power (SWaP) constrained applications. The NVIDIA Tegra K1 is expected to be a major add-on facility to General Electric's wearable and portable products.

Pfizer Inc.'s PFE shares inched up 1.05% on Tuesday after it announced positive data from a phase III study evaluating oncology drug, Xalkori, in treatment naive ALK-positive advanced non-small cell lung cancer (NSCLC) patients. The stock has gained 0.88% over the last three days.

The phase III, PROFILE 1014 study compared the use of Xalkori versus standard platinum-based chemotherapy regimens in patients with advanced NSCLC. The study met its primary endpoint with Xalkori significantly prolonging progression-free survival PFS as compared to standard platinum-based chemotherapy regimens.

Intel Corporation INTC entered the health tracking wearables market with the completion of the Basis Science acquisition. Intel's share price touched an intraday high of $25.67 on Tuesday, following the announcement before closing at $25.46, thereby recording a 1.4% increase.

The Basis team of 60 members will join Intel's New Devices Group to work on the chipmaker's future wearable products. Though the financial terms of the deal were not announced, Intel reportedly paid about $100 million. Intel will likely continue selling Basis' products through the company's present trade channels.

Caterpillar Inc. CAT faces a Senate probe for possible overseas tax evasions. The company allegedly evaded more than $2 billion of U.S. taxes by shifting profits abroad. Caterpillar will be required to attend the hearing in April held by the U.S. Senate's Permanent Subcommittee on Investigations.

The investigation dates back to 2009 when a Caterpillar employee working on the company's tax strategy alleged that the mining equipment maker resorted to a “Swiss structure” to siphon profits to offshore companies. He further alleged that Caterpillar used a “Bermuda structure,” which allows shell companies to return profits to the U.S. without paying obligatory taxes.

Performance of the Top 10 Dow Companies

The table given below shows the price movements of the ten largest components of the Dow, which is a price weighted index, over the last five days and during the last six months. Over this period, the Dow has declined 0.24%.

Next Week's Outlook:

But for Tuesday's Consumer Confidence report, positive economic data has failed to provide direction to the markets. Several key reports are lined up for next week. These include the ISM manufacturing and services indices, as well unemployment rate data. It remains to be seen whether they will have significant impact on indices.

Currently, concerns over the crisis in Crimea and Fed rate cut fears are weighing on investors. These factors may continue to impede markets unless investors start taking notice of the positive economic signals on offer.

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