Weekly Market Review 12-24-2004

Vioxx, Celebrex and now Aleve linked to heart problems
By Rick Paler


Overall this week’s market was nothing to write home about. As expected market action was very light due to the shortened holiday week. Big Pharma continued to take it on the chin this week, as another pain reliever was linked to heart attacks and strokes. There was little in the way of corporate news or earnings releases this week. Economic news for the week was light and uneventful.

In corporate news Pfizer (PFE) announced that it will halt the advertising of Celebrex, its blockbuster arthritis drug, after an ongoing study indicated the drug, a COX-2 Inhibitor was linked to an increase in heart problems in patients that took very high doses. But unlike Merck’s (MRK) Vioxx, Pfizer said that they would not pull the drug from the market. Additionally, this week a study was released that showed that Bayer AG‘s (BAY) over the counter pain reliever Aleve was linked to heart problems. At the same time, the same study indicated that Celebrex did not increase the likelihood of heart attacks or stroke and had the same results as the placebo.

Fannie Mae (FNM) reported this week that the CEO and CFO were forced to resign after major accounting problems were revealed. This will cause the company to restate earnings by as much a $9 billion. The new CEO Daniel Mudd and CFO Robert Levin immediately announced that the company had fired KPMG as the company’s independent auditor.

IAC/InterActive Corp (IACI) announced that the company would spin off Expedia.com. The travel related unit includes Expedia.com, Hotels.com and TripAdvisor. The company said it would maintain Ticketmaster, LendingTree, Evite and Match.com.

Insurance company PartnerRe Ltd. (PRE) has announced an accelerated share repurchase plan of 2 million shares. The share will be repurchased from Deutsche Bank AG (DB) on December 30.

Cell phone chip maker Qualcomm (QCOM) raised its first quarter guidance to $0.26 to $0.28 per share from a prior $0.24 to $0.26 per share. The company cited strong growth in networks using the company’s CDMA technology.

Cognizant Technology Solutions Corp. (CTSH) announced that it will be added to the NASDAQ-100 Index starting December 29, 2004. The IT service company’s President and CEO Lakshmi Narayanan said “We are the only IT Services firm on the list, and we are the first and only offshore firm to be included in the NASDAQ-100.”

In economic news, the final GDP was revised upwards to 4.0% from 3.9% and above what economist had estimated. The final University of Michigan Consumer Sentiment report for December came in above estimates, with a reading of 97.1 from the original reading of 95.7. The continuing positive economic data shows that the economy continues to improve and should continue its expansion well into 2005.

The slow week combined with economic data that did not overly surprise allowed bond rates to move very little. The 5 year Treasury note was unchanged from the prior week closing at 3.56%. While both the 10 year Treasury note and 30 year bond yields were fractionally higher, closing at 4.20% and 4.83% respectively.
Next week will be another very quite week with no earnings reports or major economic data being released. One point of interest is the fact that on a historical basis the final four days of trading combined with the first two of the New Year have averaged a return of 1.5% since 1950.