By Saumya Vaishampayan
U.S. stocks fell Monday, with the Nasdaq Composite snapping a
five-session winning streak as the biotechnology sector posted
steep losses.
The Nasdaq Composite lost 31.84 points, or 0.6%, to 5060.25.
The Dow Jones Industrial Average fell 42.17 points, or 0.2%, to
18037.97, and the S&P 500 declined 8.77 points, or 0.4%, to
2108.92. The broad-market indexes fell for the first time in four
sessions.
Even with Monday's pullback, stocks hovered near all-time highs.
The S&P and Nasdaq both closed at records Friday, marking the
sixth for the S&P and the second for the Nasdaq this year. The
Dow its 1.4% below its most recent record.
The Nasdaq Biotechnology Index lost 4.1%, falling for the second
session in a row. Health-care stocks in the S&P 500 posted the
biggest sector decline, down 1.8%.
"The weakness in biotech continues," said Sahak Manuelian, a
managing director at Wedbush Securities. "The group has been very
strong and you're starting to see some weakness post earnings," he
added.
That includes Biogen Inc., which on Friday said safety concerns
have led some patients to reconsider using its multiple-sclerosis
pill, contributing to lower-than-expected sales of the drug. Biogen
shares slipped 3.1% Monday, after falling 6.6% Friday.
Celgene Corp. agreed to buy privately held Quanticel
Pharmaceuticals Inc. for an upfront payment of $100 million in a
move that will advance its pipeline of cancer therapies. Celgene
shares fell 3.4%.
In other health-care news, Mylan NV's board rejected Teva
Pharmaceutical Industries Ltd.'s unsolicited bid. Mylan shares fell
5.7% and those of Teva slipped 4.3%.
Earnings will continue to stream in this week. Including results
from 201 companies in the S&P 500, earnings are on track to
decline 2.8% from a year earlier, according to FactSet. A decline
in year-over-year earnings in the first quarter would be the first
since the third quarter of 2012, when earnings fell 1%.
Going into the reporting season, analysts slashed forecasts as
they expected the strong dollar and weak oil prices to weigh on
profits and revenues. About 73% of companies have beat those
lowered profit expectations, while just 47% of companies have
topped revenue estimates, according to FactSet.
"There's very little inflation and usually inflation helps with
revenue growth" as people are less likely to postpone purchases in
a high-inflation environment, said Sam Stovall, U.S. equity
strategist at S&P Capital IQ.
"This bull market does have legs, but we're getting a bit
vulnerable to a correction," said Mr. Stovall. "Because interest
rates are so low, inflation is so low...there are not a lot of
alternatives to equities."
The economic calendar is busy this week, including the first
reading on first-quarter U.S. economic growth, consumer spending
for March and the Federal Reserve's preferred inflation gauge. The
Fed's statement on monetary policy, due Wednesday, will also
attract attention.
Jeff Carbone, co-founder of Cornerstone Financial Partners, said
he recently boosted his allocation to cash to about 10% and put
more money into international stocks as he expects U.S. stocks to
pull back in the near term. Cornerstone manages about $1.1 billion.
Mr. Carbone said he remains bullish on stocks for the year. "We'll
look to redeploy that [cash] in the next few months into sectors
like consumer discretionary in the U.S.," he added.
European stocks rose after Greece reshuffled its team for
bailout negotiations. France's CAC 40 gained 1.3% and Germany's DAX
rallied 1.9%. Time is running out for Greece and its creditors to
reach a new bailout deal, with the loans Greece owes to the
International Monetary Fund due in early May.
In other corporate news, Applied Materials Inc. and Tokyo
Electron Ltd. said they would abandon their plan to merge, citing
problems with the U.S. Department of Justice. The deal was unveiled
in September 2013 and would have created a company with an
estimated market value of $29 billion. Shares of Applied Materials
fell 8.4%.
Tesla Motors Inc. shares rose 6% after a Deutsche Bank analyst
said Tesla's new stationary storage business could add $100 to the
value of the company's shares.
In commodity markets, gold futures rose 2.4% to $1203.30 an
ounce. Crude-oil futures slipped 0.3% to $56.99 a barrel.
The yield on the 10-year Treasury note rose slightly to 1.923%
from 1.917% on Friday. Yields rise as prices fall.
Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com
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