Dow futures fell far harder than the S&P 500 on Tuesday after Amgen shares dropped on a rival's failed drug trial. Because the Dow is price-weighted, one high-priced stock can move the index disproportionately, while the same stock barely dents the broader market.
Dow Jones Industrial Average futures dropped 506 points, or 0.95%, shortly after the European market opened on Tuesday. S&P 500 futures retreated just 0.4% over the same stretch. Investors returning from the Labor Day break could be forgiven for wondering if their eyes were deceiving them.
Why one stock moves the Dow so much
The gap comes down to the Dow's price-weighted structure and one company: Amgen. Amgen shares fell about $22, or 5%, in early premarket trading, accounting for roughly 120 points of the Dow's decline on its own.
That outsized effect exists because Amgen has the fourth-highest stock price in the index. By contrast, Amgen ranks only 49th by size in the S&P 500, so the same one-day move is barely perceptible there.
A rival's failed trial triggered the drop
Amgen's decline traces back to a setback at Novartis. The Swiss drugmaker said on Friday night that a late-stage trial of its experimental cardiovascular drug pelacarsen did not meet its primary endpoint. Analysts at Citi called the news surprising and said it is bad for other companies targeting Lipoprotein(a), a type of cholesterol that raises the risk of heart disease and stroke and isn't helped by statin drugs.
The reaction spread beyond Amgen. NewAmsterdam Pharma, a smaller company working on the same target, dropped about 10% in premarket trading on Tuesday.
Novartis's own stock fell 3% on Monday in Swiss trade, then tumbled another 10% on Tuesday after disclosing that a separate late-stage trial, testing del-desiran for the muscular disease myotonic dystrophy type 1, also missed its primary endpoint.
Source: MarketWatch
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