The Dow Jones Industrial Average is kicking off the new week in the red as a disappointment from the flourishing housing sector pressures the markets. The blue-chip index is down 21 points as of 2:25 p.m. EDT, with most of its member stocks down for the day. The financial sector has borne the brunt of Wall Street’s blows so far, but one pharmaceutical standout is saving the Dow from worse losses. Let’s dive into the stories you need to know about today.
A slight dip in housing takes down the banks
Pending home sales contracted 0.4% for June, according to a report today from the National Association of Realtors. Rising mortgage rates have tempted some observers and analysts to back off from the rapid housing boom that has taken over 2013, as pending home sales are still up more than 10% for the year despite June’s fall. Housing starts have done even better, gaining a whopping 24% year to date.
Still, financial stocks have fallen on the news, with Bank of America Corp (NYSE:BAC) leading the way downward as shares dip 1.1%. Bank of America Corp (NYSE:BAC)’s on the right side of the Dow for the year, with the stock up more than 27% year to date, and today’s drop isn’t a danger to the big bank. B of A’s mortgage department did show weakness last quarter, while its investment-banking unit led the way for the company’s earnings. However, so long as the housing market continues its overall rebound, B of A should be just fine.
Surprisingly, the contraction in housing data hasn’t hit shares of The Home Depot, Inc. (NYSE:HD) today, despite the big retailer’s close ties to the sector’s rebound. The company’s shares have surged on housing’s comeback, and caution regarding rising mortgage rates has helped slow that surge recently. The Home Depot, Inc. (NYSE:HD) has put space between itself and its closest competitor, fellow home-improvement retailer Lowe’s Companies, Inc. (NYSE:LOW), even as both companies steam forward behind housing’s bounce.
Today’s biggest story on the Dow isn’t about the housing market, however. Shares of big pharma Pfizer Inc. (NYSE:PFE) have jumped 1.8% to lead the sluggish index today after the company announced that it will split its generic- and branded-drug businesses into two operating segments. Pfizer Inc. (NYSE:PFE)’s branded-drug business, responsible for blockbuster successes like cholesterol-fighting Lipitor, has long been the firm’s growth driver, and it’s squarely in investors’ focus going forward.
What does the split mean? It could be the prelude to a spinoff of Pfizer Inc. (NYSE:PFE)’s generics business in the near future. The company’s leadership has consolidated operations recently, selling its infant nutrition business to Nestle last year in a nearly $12 billion sale. Pfizer Inc. (NYSE:PFE) then spun off its animal-health business, now Zoetis Inc (NYSE:ZTS), earlier in the year. While the divestments have turned Pfizer Inc. (NYSE:PFE) into a smaller, more concentrated firm, the high margins and strong growth from branded-pharmaceutical sales have this company’s future — and the stock’s future — looking bright.
Pfizer Inc. (NYSE:PFE)’s long-term approach to growth is a reminder of the most important maxim of investing: The best investing approach is to choose great companies and stick with them for the long term.
The article Pfizer’s Generic Split Buffers the Dow’s Falling Financials originally appeared on Fool.com.
Fool contributor Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends Bank of America, Home Depot, and Lowe’s. The Motley Fool owns shares of Bank of America.
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