Merck Cuts Jobs, Closes Plants

Elena
28 Nov, 2005
New York City

The nation''s retailers reported a solid opening to the crucial Christmas sales period last weekend with Best Buy Co., Target Corp and Wal-Mart among the biggest gainers. The National Retail Federation reported 22% sales increase to $27.8 billion over the weekend. Drug maker Merck & Co announced a plan to cut 11% of its work force and shut five manufacturing plants by 2008. The news sent averages lower.

U.S. MARKET AVERAGES

U.S. stock markets opened lower, despite stock futures indication of positive Monday start. Higher opening was expected after retail sales surged 22% over the weekend, the beginning of the busy holiday shopping season, but stocks drifted lower after drug maker Merck & Co announced a restructuring plan, involving job cuts.

Wall Street's upbeat mood turned gloomy on Merck's plan to slash 11% of its work force and shut five manufacturing plants by 2008 as the company struggles with thousands of lawsuits over its Vioxx painkiller and faces losing patent protection for another top-selling drug.

In the first hour of trading, the Dow Jones industrial average lost 1.76, or 0.02%. The Standard & Poor's 500 index was off 3.75, or 0.3%, and the Nasdaq composite index fell 9.21, or 0.41%.

Bonds advanced, with the yield on the 10-year Treasury note falling to 4.42% from 4.43% late Friday.

The disk drive sector is a notable gainer in early going. M-Systems ((FLSH)) and SanDisk ((SNDK)) are pushing the space higher, with gains of 6.3% and 4%, respectively. The airline group is also showing strength, climbing by 1.4%.

Oil prices drop sent oil stocks down with a 1.5% slide in the oil service space. The biotech sector is also weak, including a 2.5% decline in Gilead Sciences ((GILD)).

Following last-week holiday trading, news flow is likely to be slow on Monday. No major economic reports are due out on Monday, and corporate news is still likely to be scarce.

MOVERS AND SHAKERS

Legg Mason cut Yahoo, Inc ((YHOO)) to hold from buy, citing valuation.. The broker told clients that the company's shares are up more than 25% since October and are now within 1% of its $42.50 target price. At current valuations, Legg Mason said it continues to favor Yahoo over Google, Inc. The stock slipped $3.1%

Merck & Co ((MRK)) announced a global restructuring plan, including the elimination of 7,000 jobs by the end of 2008 and the close of 5 of its 31 manufacturing plants. The company expects to record restructuring related charges of $1.8 billion to $2.2 billion, with the bulk completed by 2008. The drugmaker expects the program to lead to total savings of $3.5 billion to $4 billion from 2006 through 2010. The company now expects 2005 earnings, excluding non-recurring items, to be close to analyst expectations of $2.50 a share. The stock is currently down 3.3%.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks advanced across the region, lifted by higher Wall Street close Friday, positive U.S. retail revenue data, and continuously strengthening dollar. The Nikkei gained 1.4%, hitting a fresh high of 14,986,96 on exporter issues, boosted by the stronger dollar. Among other regional markets, Australia’s All Ordinaries rose 0.4%, Hong Kong’s Hang Seng added 0.2%, while South Korea’s Kospi was flat at 0.04%.

European markets gained at mid-day dealings on strong close of U.S. equity markets Friday, lower oil prices and corporate news, including Ahold and Novartis. The German SAX 30 was the biggest advancer, rising 0.7%, the French CAC 40 climbed 0.5%, and London’s FTSE 100 gained 0.44%.

OIL, METALS, CURRENCIES

Crude oil prices declined on mild weather forecast and lower fuel demand. Light sweet crude for January delivery dropped $1.30 to $57.41 a barrel. London Brent was little changed, adding 5 cents to $55.06. Commodities markets were closed on Thursday and Friday for Thanksgiving holiday.

European Gold traded mixed. In London the precious metal was fixed at $497.30 per troy ounce, up from $495.70. In Zurich gold traded unchanged at $495.95. In Hong Kong gold climbed $1.80 to close at $497.75. Silver traded unchanged at $8.13.

The U.S. dollar advanced against its major counterparts. The euro was quoted at $1.700, down from $1.1723. The dollar bought 119.79 yen, up from 119.58. The British pound stood at $1.7091, down from $1.7141.

EARNINGS NEWS

Hillenbrand Industries, Inc ((HB)) announced that Q4 loss from continuing operations narrowed to $1.56 a share, from $3 a share in the year-earlier period on 6% revenue growth. The company envisages fiscal-year earnings from continuing operations in the range of $3.30 to $3.40 a share.

CORPORATE NEWS

Applied Films Corp. ((AFCO)) announced that it has agreed to sell its 50% stake in its Chinese joint venture, Suzhou NSG AFC Thin Films Electronics Co., Ltd to its joint venture partner Nippon Sheet Glass for $14.6 million. Applied Films stated that it will take an impairment charge of $1.7-$1.9 million related to the deal.