Merck, economic news hit markets

Wall Street closed out a dismal third quarter with a mixed performance Thursday after Merck & Co. said it would be forced to remove its best-selling Vioxx arthritis drug from the market. Merck’s unexpected bad news left blue chips with a loss for the day, while high-tech stocks got a lift from bargain hunters.

Merck’s troubles — Vioxx was found to carry an increased risk of heart attack and stroke — were magnified because the company is part of the Dow Jones industrials. Analysts said the Dow likely would have been flat to slightly higher without Merck’s announcement.

Bad economic news also weighed on stocks as the Labor Department reported the highest increase in weekly first-time jobless claims in seven months, and the Commerce Department reported consumer spending was flat for the month of August.

“I think the Merck bombshell has certainly superseded anything else we might have gotten today,” said Bryan Piskorowski, market analyst at Wachovia Securities. “Merck is going to keep us in the trading range we’ve been in all week, and I think we’ll be in that range for the short term, at least until earnings come out in a few weeks.”

The Dow fell 55.97, or 0.6 percent, to 10,080.27. Merck represents 3.27 percent of the Dow, and Dow Jones & Co., which manages the index, said Merck’s tumbling share price equated to at least an 88-point drop.

Broader stock indicators were narrowly mixed. The Standard & Poor’s 500 index was down 0.22, or 0.02 percent, at 1,114.58, and the Nasdaq composite index gained 2.90, or 0.2 percent, to 1,896.84.

While Merck’s troubles seemed to be limited to the company itself — pharmaceutical stocks were mixed to slightly lower on the news — it was just one of many pressures on stocks throughout the third quarter, which saw oil prices rise past $50 per barrel, an unexpected slowdown in economic growth and a series of negative earnings warnings from top companies.

Fellow Dow component Pfizer Inc., maker of the rival Celebrex drug, gained 42 cents to $30.60 on the news, while other major pharmaceutical companies were slightly lower. GlaxoSmithKline PLC slipped 11 cents to $43.73, while Bristol-Myers Squibb Co. lost 19 cents to $23.67.

The major indexes ended the quarter substantially lower, with the Dow losing 3.4 percent, the Nasdaq tumbling 7.4 percent and the S&P 500 dropping 2.3 percent. The Dow’s losses from July to September was the biggest quarterly decline since the first quarter of 2003, while the Nasdaq’s losses for the quarter were the worst since the third quarter of 2002.

Advancing issues outnumbered decliners by more than 8 to 5 on the New York Stock Exchange, where preliminary consolidated volume came to 2.18 billion shares, compared with 1.75 billion on Wednesday.

The Russell 2000 index of smaller companies was up 1.86, or 0.3 percent, at 572.93.

Overseas, Japan’s Nikkei stock average rose 0.4 percent. In afternoon trading, Britain’s FTSE 100 closed down 0.4 percent, France’s CAC-40 tumbled 1.1 percent for the session, and Germany’s DAX index dropped 0.7 percent.