The S&P 500 and Nasdaq swooned in the wake of a two-day rally when energy shares followed oil prices lower as supply neared 80-year highs, and Gilead and other biotech names declined.
By Paolo Palazzi-Xirinachs
Thursday, February 5, 2015
Today’s dip in stocks follows a 2-day gain of 2.8% for the S&P 500, driven largely by the jump in energy shares. The S&P 500 energy index was off 1.8% as oil prices declined after a four-day surge of nearly 20%. US crude was down 8.2% following a new build in US crude stockpiles.
At least for now it would seem that investors have focused in on the price of crude oil as being the best barometer of what's going on in terms of economic activity, likely because it is quantifiable. The pending EU situation and Bank of China’s adopting a monetary stimulus policy are not.
Leading biotechnology shares lower was Gilead Sciences, whose stock dropped 7.7% to $98.82 a day after the drug maker said it is offering steeper-than-expected discounts on its hepatitis C drugs to health insurers and other group payers. The news fueled concerns the sector would face increasing price pressure. As a result the Nasdaq Biotech Index was down 1.5%. Gilead was also the biggest drag factor on both the S&P 500 and Nasdaq.
Also in the healthcare space, Merck shares lost 2.8% to $59.32 after they reported slightly disappointing fourth quarter sales.
Staples agrees to buy Office Depot
Staples plans to buy Office Depot for about $6.3 billion, forging a deal that will reduce the US office-supply industry to a single major chain and test the limits of antitrust regulators, certain to weigh in on the proposed deal.
Office Depot shareholders will get $7.25 in cash and 0.2188 of a share in Staples stock at closing, the retailers said in a statement Wednesday. The offer represents a premium of 44% over the price on Feb. 2, before news of the talks was reported.
The two companies - which agreed to the merger after pressure from activist investor Starboard Value - would create a retail chain with about $39 billion in revenue and thousands of stores. The move is expected to draw scrutiny from the Federal Trade Commission, though regulators have been increasingly willing to approve retail mergers in light of burgeoning e-commerce competition.
Investors endorsed the move on Tuesday after reports of the pending merger first surfaced. Office Depot soared 22% yesterday, while Staples gained 11%. So far today Office Depot has risen an additional 1.3% percent to $9.40, but Staples has retreated almost 11% to $16.94, giving back its gains from the previous day.
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