Stocks drop; Biotech takes another plunge

Friday, April 4, 2014, Vol. 38, No. 14
The Associated Press

NEW YORK (AP) — Another plunge in the biotechnology sector led stock indexes down Thursday, as Biogen Idec, Gilead Sciences and other biotech companies extended a recent slump. EBay fell after Carl Icahn abandoned an effort to shake up the company and Bed Bath & Beyond fell after reporting weak sales figures.

KEEPING SCORE: The Nasdaq composite index fell 111 points, or 2.7 percent, to 4,072 as of 1:45 p.m. Eastern time. Other indexes also fell, but not nearly as much. The Standard & Poor's 500 index fell 29 points, or 1.6 percent, to 1,842 and the Dow Jones industrial average lost 193 points, or 1.2 percent, to 16,244. Small-company stocks also slid as investors reduced their exposure to riskier parts of the market. The Russell 2000 fell 30 points, or 2.6 percent, to 1,130.

OUT OF FAVOR: Biotech stocks have gone from investor favorites to pariahs. After making big gains last year, biotechs have been crushed in recent weeks as they come under pressure to lower prices for their drugs. Biogen dropped $14.33, or 5 percent, to $286.35 and Gilead slid $4.73, or 7 percent, to $65.92. Both roughly doubled in value last year.

Other recent favorites also took a drubbing. Facebook, another stock that doubled last year, sank $3, or 5 percent, to $59.41.

UP, THEN DOWN: The market's drop wiped out gains made earlier in the week. On Wednesday, minutes from the Federal Reserve's latest meeting reassured investors that the central bank wasn't in a hurry to raise interest rates. The S&P 500 had its best day in a month.

"I look at this and I think the market is looking for a reason to go higher," said Brad McMillan, Chief Investment Officer for Commonwealth Financial. "Every time it seems to have one, the next day it goes, 'Nah, not good enough.' "

ICAHN OUT: Ebay's stock dropped on news that Carl Icahn is backing down from his campaign to shake up the company. The e-commerce company has been fighting a push from the activist investor to spin off PayPal, eBay's mobile payment business. Ebay's stock fell $1.56, or 3 percent, to $54.33.

COOL RECEPTION: Ally Financial's stock slumped in its market debut. The former financing arm of General Motors raised $2.4 billion in an initial public offering Wednesday, allowing the federal government to recoup the money used to bail out the company during the 2008 financial crisis. Ally dropped $1, or 4 percent, to $24.

RITE AID: Shares of Rite Aid surged after the retailer turned in quarterly results that topped analysts' expectations. Rite Aid also announced the acquisition of RediClinic and said it plans to expand the Texas chain of health clinics. The company's stock gained 64 cents, or 10 percent, to $7.05.

AND BEYOND: Weaker sales at Bed Bath & Beyond drove the company's stock down $4.31, or 6 percent, to $63.59. The company reported a drop in quarterly revenue and profit late Wednesday. Like many other retailers, Bed Bath & Beyond laid some of the blame on cold winter weather for keeping customers at home.

JOBS: The Labor Department said that the number of people applying for U.S. unemployment benefits dropped to 300,000, the lowest level in nearly seven years. The less-volatile four-week average dropped, too. Fewer Americans sought unemployment benefits last week than at any point since the Great Recession started in December 2007.

REACTION: "What today's ... unemployment claims number tells us is that current labor market conditions are normal," Chris Rupkey, chief financial economist at the Bank of Tokyo, wrote in a note to clients. "The outlook for the labor market is assured. The economy does not need additional stimulus."

BONDS AND COMMODITIES: In government bond trading, the yield on the 10-year Treasury note dipped to 2.63 percent from 2.69 percent late Wednesday. The price of crude oil fell 28 cents to $103.32 a barrel. Gold climbed $14.60 to settle at $1,320.50 an ounce.