The stock markets in the United States fell primarily due to the selloff in the healthcare and energy sectors. Valeant Pharmaceuticals’ significant decline distracted investors amid one of the busiest days for corporate earnings.
Citron Research called Valeant Pharmaceuticals as the “Enron of pharmaceuticals,” which prompted investors to sell their stake in the company. The equity research firm alleged that Valeant is using pharmacies related to Philidor to store inventory and record the transactions as sales. Citron Research also alleged that Valeant/Philidor appeared to have created an entire network of phantom captive pharmacies to avoid auditors’ scrutiny by reporting fake sales of drugs.
In an interview with Bloomberg, Andrew Burkly, head of institutional portfolio strategy at Oppenheimer commented, “We were looking for biotech and health-care as a form of leadership to stabilize the market and this news certainly doesn’t help. That was the component we were missing on the rally, and this sets that back.”
Meanwhile, the corporate earnings were encouraging as several big companies including Boeing and General Motors posted financial results above expectations.
[drizzle]Phil Orlando, chief strategist at Federated Investments, said, “Earnings are clearly the story today. Earnings, by and large, have been better than expected,”
- Dow Jones Industrial Average (DJIA) – 17, 170.34 (-0.27%)
- S&P 500- 2,019.01 (-0.58%)
- NASDAQ- 4,840.20 (-0.84%)
- Russell 2000- 1,146.98 (+1.40%)
- EURO STOXX 50 Price EUR- 3,272.23 (+0.51%)
- FTSE 100 Index- 6,348.42 (+0.05%)
- Deutsche Borse AG German Stock Index DAX- 10,238.10 (+0.89%)
- Nikkei 225- 18,554.28 (+1.91%)
- Hong Kong Hang Seng Index- 22,989.22 (-0.37%)
- Shanghai Shenzhen CSI 300 Index- 3,473.25 (-2.92%)
Stocks in Focus
The stock price of Valeant Pharmaceuticals closed $118.32 per share, down by more than 19%. Earlier to day, the shares of the company plummeted as low as $88.50 per share. The company recovered some of its losses after Bill Ackman disclosed the he increased his stake in the company bu 2 million shares.
General Motors gained nearly 6% to $35.44 per share. The automaker reported that its third-quarter earnings increased to $0.84 per share from $0.81 per share in the same period a year ago. Its revenue was $38.8 billion, down from $39.3 billion last year. Analysts at Bank of America Merrill Lynch reiterated their Buy rating in the stock with a price target of $44 per share.
Chipotle Mexican Grill declined almost 6% to $664.68 per share. The company posted weaker-than-expected financial results for the third quarter. Its earnings were $4.59 per share on $1.2 billion in revenue. Analysts expected the company to deliver earnings of $4.62 per share on $1.22 billion in revenue.