The S&P 500 and Dow industrials on Wednesday finished at their lowest levels since early August as selling in health-care shares, sparked by intensifying outrage over the pricing of a lifesaving drug by Mylan, put pressure on the broader market.
Mylan Inc. MYL, -5.41% has been in focus for the past several sessions as lawmakers have criticized the drugmaker’s decision to raise the price of its EpiPens, widely used to treat anaphylactic shock.
Shares sank 5.4%, and are off more than 11% this week.
The slump in Mylan nudged the health-care sector lower and weighed on the exchange-traded iShares Nasdaq Biotechnology ETF IBB, -3.36% which was down 3.4%—its worst daily slide in two months, according to FactSet data.
The Nasdaq Composite Index COMP, -0.81% suffered the brunt of the market’s retreat, trading down 42.38 points, or about 0.8%, to close at 5,217.69. The tech-heavy index closed at its lowest level since Aug. 8., and experienced its worst daily slump in three weeks.
Still, moves in the broader equity market have been relatively tepid. The main benchmarks inched toward record highs on Tuesday as investors kept up their vigil ahead of the Federal Reserve’s summer symposium in Jackson Hole, Wyo., on Friday.
“With the market near all-time highs, it becomes extremely sensitive to a news event,” said Randy Frederick, managing director at Schwab Center for Financial Research.
Frederick attributed the afternoon slide to a combination of slumping oil futures after a pick up in crude inventories and worries about Mylan.
“I think it’s fair to say that this selloff—not that this is really much of one—is a little bit of health care and oil,” he said.
The U.S. Energy Information Administration early Wednesday reported that domestic crude supplies rose by 2.5 million barrels in the week ended Aug. 19, significantly above the 200,000-barrel climb expected by analysts polled by S&P Global Platts.
The S&P 500 index SPX, -0.52% lost 11.46 points, or 0.5%, to end at 2,175.44. Following Mylan’s lead, the health-care sector was off 1.6%, representing the sharpest loss among the index’s 10 sectors.
Support for the large-cap benchmark is around 2,142-2,166, while the gauge has been meeting resistance at the 2,191 level, said Katie Stockton, chief technical strategist at BTIG, in a Wednesday research note.
Meanwhile, the Dow Jones Industrial Average DJIA, -0.35% gave up 65.82 points, or 0.4%, at 18,481.48. Shares of UnitedHealth Group Inc. UNH, -1.51% and Merck & Co. Inc. MRK, -1.34% were each off more than 1%, dragging the blue-chip benchmark into the red.
The Dow and S&P 500 marked their lowest closes since Aug. 4.
Earlier, a reading of existing home sales didn’t do much to inspire buying, with stocks continuing to trade in a tight range on seasonally light summer volume.
July sales of previously owned homes fell 3.2% to a seasonally adjusted annual rate of 5.39 million, the National Association of Realtors said Wednesday. That was lower than the 5.48 million pace that economists polled by MarketWatch had forecast and 1.6% lower than a year ago.
Stocks ended Tuesday’s session a touch higher, bolstered by the new-home-sales data, which contrasted with Wednesday’s existing-home sales report.
Investors have mostly held off on big bets on Wall Street ahead of comments from Fed Chairwoman Janet Yellen at the central bank’s retreat at Jackson Hole. Yellen’s speech there will be closely watched for hints about U.S. monetary policy and the path of interest rates.
“Everyone’s sort of sitting on pins and needles waiting to see what Yellen does with her Jackson Hole comments on Friday,” said Phil Orlando, chief market strategist at Federated Investors.
A lack of significant market catalysts has resulted in a weekslong stint of relatively muted action.
Frank Cappelleri, sales trader and market technician at Instinet, said, on an intraday basis, the S&P 500 has been moving no more than 3/4 of a percentage point for the past 31 of the last 32 trading days.
Cappelleri takes heart in the fact that the tight ranges has been part of a gradual grind higher, with the S&P 500 and Nasdaq hanging around records.
“Between the uptrend and the typical summer volumes there’s been very little for traders looking for an edge or trying to locate a possible inflection point,” he said. “The lack of momentum has been frustrating,” said Cappelleri.
Some market observers believe that Yellen’s Jackson Hole remarks could produce that inflection point.
“Investors should keep diligent this week, as the increasing focus on Yellen’s speech may present a threat of creating explosive levels of volatility, if market participants are left empty-handed on U.S. rate-hike timings,” Otunuga added.
Deadly earthquake strikes central Italy
A deadly 6.2-magnitude earthquake hit central Italy early Wednesday, leveling buildings as people slept.
Pfizer Inc. PFE, -0.77% agreed to buy part of AstraZeneca PLC’s AZN, -0.98% AZN, +0.36% antibiotics business for up to $1.575 billion plus royalties. Pfizer shares fell 0.8%, reversing earlier gains as health care sold off.
Shares in La-Z-Boy Inc. LZB, -12.69% reported quarterly earnings and sales that missed expectations, sending shares tumbling 13%.
Other markets: Asian shares closed mixed, with Japanese shares NIK, -0.24% closing higher while Hong Kong equities HSI, -0.26% fell. Gold prices US:GCF6 slumped to a one-month low, and crude-oil futures CLV6, -0.21% settled at a one-week low after the higher-than-forecast inventories.