Stocks fell as drug-trial setbacks pulled health care lower: Tuesday recap

Stocks retreated to open the holiday-shortened week. The Dow Jones Industrial Average did the heaviest work, falling 1.1% to 52,786.07. The S&P 500 slipped 0.5%, closing at 7,673.52. The Nasdaq Composite was little changed, finishing at 26,421.41 as steadiness in technology offset weakness across most other groups. The selling was broad but shallow, and it left the major indexes roughly flat for the week so far.

The split ran along sector lines. Of the eleven groups in the S&P 500, only three finished higher. Energy was the day’s clear leader, up 1.1%, and utilities added 0.9%. Technology eked out a 0.3% gain, and that was enough to keep the tech-heavy Nasdaq from joining the decline. Everything else leaned lower. Health care was the worst group by a wide margin, off 2.5%. Financials came next, down 1.4%, with materials off about 1% and consumer discretionary close behind. Consumer staples, industrials, and communication services each gave back a fraction of a percent, while real estate finished all but unchanged.

Most of the damage in health care came from a single company. Novartis shares tumbled after the drugmaker said its experimental therapy pelacarsen had failed to reduce the risk of heart attacks and strokes in a large late-stage cardiovascular study, even though the drug lowered the blood fat it was designed to target. The disappointment landed on top of two other recent setbacks for the company: a failed trial of a separate treatment and a group of cell-therapy studies paused after patient deaths. Three stumbles inside a week added up to one of Novartis’s worst sessions on record, and because it is among the largest names in the sector, its drop pulled health care down with it.

Energy moved the other way, and the reason was in the commodity pits. Crude oil prices climbed as traders weighed rising tensions in the Middle East and the threat those tensions pose to global supply. Higher crude tends to lift the earnings outlook for oil producers and the service companies that drill for them, and the energy group’s 1.1% gain reflected that math. It was the only sector to advance by more than a percent.

Beneath the sector moves, the tape stayed orderly. The Russell 2000 fell 0.5%, close to the large-cap indexes, so smaller companies were neither leading the selling nor escaping it. The Cboe Volatility Index rose to 15.72, up modestly on the day but still low by any historical standard, a reading well within the range that signals a calm options market. The 10-year Treasury yield sat at 4.77%. None of those signals suggested a market bracing for trouble. The session amounted to money leaving one wounded sector while oil pulled the other way.

The week’s calendar fills in quickly from here. Producer prices are due Thursday and the consumer price index follows Friday, the last major inflation readings before the Federal Reserve meets on September 15 and 16. Weekly jobless claims and a fresh look at existing-home sales arrive alongside them. For now, the market spent the session sorting one bad batch of drug data from one bump in the price of oil.

This is a general-market summary for information only — not investment advice, and not a recommendation regarding any security.