(Updates to midday, changes byline)
By Cal Mankowski
NEW YORK, April 29 (Reuters) - U.S. stocks declined on
Tuesday after regulators rejected a key new drug from Merck &
Co Inc <MRK.N>, a Dow component and a pharmaceuticals
bellwether, and a survey showed a sharp drop in consumer
confidence.
Merck's 10 percent slide hurt both the Dow and the S&P
500, a day after the company said the U.S. Food and Drug
Administration had spurned its new drug, Cordaptive, aimed to
raise the level of HDL or "good" cholesterol. Several
brokerages cut price targets on the stock.
The latest economic data increased investors' fears of
recession, with consumer confidence hitting a five-year low in
April, as well as signs that more homeowners are falling
behind in their mortgage payments and foreclosures are rising.
The Standard & Poor's/Case Shiller home price index showed
prices of existing U.S. single family homes fell further in
February.
With fears of recession mounting, the Federal Reserve's
comments on the economy took on particular urgency. The Fed
was scheduled to begin a two-day meeting on the economy and
interest rates on Tuesday, with the decision on interest
ratess expected on Wednesday.
"I think a 25-basis-point cut is widely anticipated," said
Al Goldman, chief market strategist at Wachovia Securities, in
St. Louis. He said the stock market generally sees some
selling before a Fed announcement.
"It would make everybody happy if they cut 25 basis
points, and come out and say, 'that's it' for the foreseeable
future," Goldman said. "That could be why the dollar has been
strengthening lately and oil is down $2 today."
The Dow Jones industrial average <> declined 38.10
points, or 0.30 percent, to 12,833.65. The Standard & Poor's
500 Index <.SPX> fell 5.46 points, or 0.39 percent, to
1,390.91. The Nasdaq Composite Index <> lost 8.99 points,
or 0.37 percent, to 2,415.41.
In addition to Merck's jolt from the FDA, news from two
biotech companies gave investors a reason to sell some
drug-related stocks.
Biotechnology companies Genentech Inc <DNA.N> and Biogen
Idec Inc <BIIB.O> said studies of Rituxan did not meet the
main goal of helping patients with lupus. []
Merck shares slid 10 percent, or $4.14, to $37.30 on the
New York Stock Exchange, while Genentech <DNA.N> dropped 6.1
percent to $68.68. On the Nasdaq, Biogen Idec shares declined
4.2 percent to $61.95.
The American Stock Exchange pharmaceutical index <.DRG>
was down 1 percent.
In contrast, International Business Machines Corp <IBM.N>
provided some positive news by raising its dividend 25
percent. IBM's stock rose 0.5 percent to $122.29.
Among home builders, shares of luxury home builder Toll
Brothers <TOL.N> fell 1.8 percent to $23.41 on the NYSE.
As the impact of a faltering consumer was likely to
reverberate through the broader economy, investors also sold
shares of big manufacturers, including General Electric
<GE.N>, whose stock fell 1.2 percent to $32.76, and
Caterpillar Inc <CAT.N>, whose shares shed 1.7 percent to
$81.65.
(Reporting by Cal Mankowski; Additional reporting by Ellis
Mnyandu; Editing by Jan Paschal)
