Markets Close Lower as Investors Wait for Decision About Syria

American stocks fell in a thinly traded session on Friday as investors avoided making large bets before a long weekend with the situation about Syria still uncertain.

Afternoon trading was volatile, with indexes swinging between break-even levels and solid losses as Secretary of State John Kerry said in televised remarks that Syria’s government used poison gas against civilians and made the case for a limited military response.

“People are uneasy not knowing what’s going on,” said John Carey, portfolio manager at Pioneer Investment Management in Boston. “With that uncertainty and going into the Labor Day holiday, we’re seeing people step back.”

The Dow Jones industrial average was down 30.64 points, or 0.21 percent, at 14,810.31. The Standard & Poor’s 500-stock index fell 5.20 points, or 0.32 percent, at 1,632.97. The Nasdaq composite index was down 30.44 points, or 0.84 percent, at 3,589.87.

Trading was light ahead of the market holiday on Monday for Labor Day. About 3.99 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, below the daily average so far this year of about 6.31 billion shares.

“I tend to view the weakness as a buying opportunity, barring some global crisis,” said Mr. Carey, who helps oversee about $200 billion in assets. “Syria isn’t the crisis in and of itself, but if we do take military action, there could be repercussions.”

It has been a tough month over all for stocks. The S.& P. 500 fell 3.1 percent in August and lost 1.8 percent for the week in a third decline in the last four weeks.

The Nasdaq fell 1.9 percent for the week while the Dow slid 1.3 percent in its fourth consecutive weekly loss. For the month, the Dow fell 4.4 percent and the Nasdaq lost 1 percent. Only one of the 30 Dow components, Microsoft, ended higher in August.

Almost 70 percent of stocks traded on the New York Stock Exchange closed lower on Friday, while 73 percent of Nasdaq-listed shares ended in negative territory.

Video game companies were among the Nasdaq’s biggest decliners on Friday. Electronic Arts fell 3.37 percent, to $26.64, while Activision Blizzard fell 2.57 percent, to $16.32.

The chip maker OmniVision Technologies tumbled 16.08 percent on earnings weakness. It forecast current-quarter adjusted profit largely below expectations as rising competition and a slowdown of smartphone sales in the United States led to an inventory pileup.

Salesforce.com, the best performer in the S.& P. 500, jumped 12.55 percent, to $49.13, after the company raised its fiscal 2014 sales outlook and reported better-than-expected revenue and earnings. The Apache Corporation, the oil and gas producer, climbed 8.95 percent, to $85.68. The company said it was selling a 33 percent stake in its Egypt oil and gas business for $3.1 billion to the state-owned Chinese oil giant Sinopec Group.

The price of the benchmark 10-year Treasury note fell 8/32, to 97 16/32, and its yield rose to 2.79 percent, from 2.76 percent late Thursday.

Economists Lower Sights on Growth

WASHINGTON — Wholesale inventories in the United States fell unexpectedly for a second straight month in June, prompting economists to trim their second-quarter economic growth estimates.

The Commerce Department said on Friday that wholesale inventories fell 0.2 percent after declining 0.6 percent in May.

This was weaker than the government had assumed in its advance estimate of the second-quarter gross domestic product published last week, which put growth at a 1.7 percent annual pace.

Inventories are a crucial component of G.D.P. changes. As a result of the unexpected decline in stocks at wholesalers in June, economists pared their estimates for second-quarter G.D.P. growth by one-tenth of a percentage point.

They had raised their estimates to as high as a 2.5 percent pace after manufacturing inventories in June came in slightly higher and the United States trade deficit narrowed more than the government had estimated in its first G.D.P. reading.

Jim O’Sullivan, chief United States economist at High Frequency Economics in Valhalla, N.Y., said the June wholesale data “subtract a little from the likely upward revision to second-quarter real G.D.P. growth.”

Barclays lowered its second-quarter G.D.P. estimate to a 2.4 percent pace from 2.5 percent. JPMorgan now expects growth will be revised to a 2.2 percent rate instead of 2.3 percent.

Wholesale inventories in June were pulled down by auto stocks, which tumbled 1.5 percent, the most since December. Stocks of electrical goods, hardware, paper, metals and apparel also fell.

“This softer inventory accumulation in the second quarter is modestly favorable for third quarter growth,” said Daniel Silver, an economist at JPMorgan in New York.

Sales at wholesalers rose 0.4 percent in June after increasing 1.5 percent in May. The rise in June was below economists’ expectations for a 0.7 percent gain.

Wall Street Closes Lower on Uncertainty After Fed Officials’ Views

Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, told Market News International in an interview that the Fed could begin trimming the size of the stimulus program as soon as September, but might wait longer if the expected economic growth in the year's second half fails to materialize.

Later in the session, Chicago Fed President Charles Evans echoed the sentiment when he said the central bank will probably decrease the program later this year and could do so as early as next month, depending on the economic data.

Fed officials "are all hedging themselves, which is why the market continues to just be a little bit confused and why it is going to churn," said Ken Polcari, director of the NYSE floor division at O'Neil Securities in New York.

"There is really no reason at the moment for the market to go higher because it is still too unclear."

One catalyst for Monday's downturn in the Dow and the S&P 500 was provided by Richard Fisher, president of the Federal Reserve Bank of Dallas. He said he supported scaling back the central bank's stimulus next month unless economic data takes a turn for the worse.

The S&P 500's decline on Tuesday was its biggest fall since June 24 as investors continued to take profits from the recent rally that drove the Dow Jones industrial average and the benchmark S&P to back-to-back record closing highs late last week.

The Dow Jones industrial average fell 93.39 points or 0.60 percent, to end at 15,518.74. The S&P 500 declined 9.77 points or 0.57 percent, to 1,697.37. The Nasdaq Composite dropped 27.182 points or 0.74 percent, to 3,665.77.

Earlier, the Dow fell as low as 15,473.40, while the S&P 500 touched a session low of 1,693.29, and the Nasdaq hit an intraday low of 3,654.672.

The S&P 500 has risen for five of the past six weeks, gaining more than 7 percent over that period.

Volume was light for the second straight day, with about 5.5 billion shares traded on the New York Stock Exchange, NYSE MKT and Nasdaq, below the daily average of 6.36 billion. The thin volume exaggerated the market's swings.

Monday marked the lowest volume for a full-day session so far this year. With major U.S. economic data like the nonfarm payrolls report and earnings from bellwethers out of the way, volume is expected to be light throughout the week.

Walt Disney Co posted a slightly higher quarterly profit that beat Wall Street's expectations, even though its movie studio earnings declined, in results released after the closing bell. Disney's stock fell 1 percent to $66.35 in extended-hours trading. The stock ended regular trading at $67.05, up 1.6 percent.

During the regular session, the biggest drag on the Dow was International Business Machines Corp. The stock dropped 2.3 percent to $190.99 after Credit Suisse cut its rating to "underperform" from "neutral," saying growth would be a challenge for IBM in the future. Credit Suisse also cut its price target on the Dow component by $25 to $175. IBM topped the list of the Dow's 10 worst-performing stocks.

Bank of America shares declined 1.1 percent to close at $14.64 after the U.S. Justice Department and the Securities and Exchange Commission filed civil lawsuits against the bank for what government lawyers said was a fraud on investors involving $850 million of residential mortgage-backed securities. The stock was among the Dow's 10 bottom performers.

The S&P financial index lost 0.9 percent.

Retailers' shares were among the day's biggest losers. American Eagle Outfitters shares tumbled 12 percent to $17.57 a day after the retailer said its second-quarter profit would be hurt by weak sales and margins. A number of analysts downgraded the stock. The S&P retail index slipped 0.4 percent.

Of the 418 companies in the S&P 500 that had reported earnings for the second quarter through Tuesday morning, Thomson Reuters data showed that 67.5 percent have topped analysts' expectations, in line with the average beat over the past four quarters. On the revenue side, the data showed that 54 percent have reported revenue above estimates, more than in the past four quarters but below the historical average.

Declining stocks outnumbered advancing ones on the NYSE by a ratio of about 3 to 1, while on the Nasdaq, more than two stocks fell for every one that rose.

(Editing by Jan Paschal)

Wall St. Edges Lower, Waiting for Fed Minutes

Stocks edged lower on Wednesday, stalling after a four-day rally as attention turned to the afternoon release of minutes from the Federal Reserve’s June meeting.

In midday trading the Standard & Poor’s 500-stock index and the Dow Jones industrial average were both 0.2 percent lower, while the Nasdaq composite gained 0.1 percent.

The minutes from the June 18-19 meeting of the Federal Reserve’s Federal Open Market Committee will be scrutinized by investors for any hints on the central bank’s plan to wind down its monetary stimulus.

“I think all eyes are really on that Fed meeting and the minutes that come out,” said Anthony Conroy, head trader for ConvergEx in New York. “People are trying to figure out exactly when, how big, and how quickly, so that’s bringing a little bit of nervousness.”

China warned on Wednesday of a “grim” outlook for trade after data showed exports fell 3.1 percent in June against forecasts for a rise of 4 percent. However, the data fueled speculation the China’s central bank may ease policy in an effort to encourage growth.

The news from China helped push European shares lower, but they pared losses through the day and the FTSEurofirst 300 index closed unchanged. In Asia the Shanghai composite in China closed 2.2 percent higher, while the Japan’s Nikkei was 0.4 percent lower.

Oil prices on both sides of the Atlantic rose, with the New York benchmark crude climbing 1.9 percent, to $105.45 a barrel, buoyed by a sharp decline in fuel stockpiles in the United States.

On Wall Street financial shares were weakest, with PNC Financial Services dropping 2.6 percent and Wells Fargo down 1.9 percent. Nabors Industries, a provider of drilling rigs, fell 5.4 percent and was one of the worst performers in the S.&P. 500 after it warned that its second-quarter operating profit would fall short of market expectations.

The S.&P. 500 has risen 2.4 percent over the last four sessions, pushing the index to within 1 percent of its closing high May 21 of 1,669.16 points.

Bank of England Comments Send the Pound Lower

LONDON — Barely four days in the job, Mark J. Carney, the new Bank of England governor, is already having an impact on markets here.

The pound dropped about 1.3 percent against the dollar and also fell against other major currencies on Thursday after the central bank said that any expectations that interest rates would rise soon from their current record-low level were misguided.

The statement, issued along with the bank’s monthly interest rate announcement, was itself a departure from previous practice and showed that Mr. Carney, who became governor on Monday, is already making his mark on procedures.

“The drop in the pound is byproduct of the comments, and the market reaction indicates just how eager it is for comments from the new regime,” Peter Dixon, an economist at Commerzbank, said.

The central bank decided to leave its main rate at 0.5 percent and also held its program of economic stimulus at £375 billion, or $570 billion. Recent data from the services and manufacturing industries had surprised some economists by showing faster rates of growth.

The bank said it decided to keep stimulus and the interest rate unchanged as “there have been further signs that a recovery is in train, although it remains weak by historical standards and a degree of slack is expected to persist for some time.”

“In the committee’s view, the implied rise in the expected future path of bank rate was not warranted by the recent developments in the domestic economy,” the bank said.

Mr. Carney, a Canadian who succeeded Mervyn A. King as governor, is expected to communicate more clearly than his predecessor which steps the central bank might take to spur growth. The former governor of Canada’s central bank has also said he is a supporter of U.S. Federal Reserve-like guidance for how long interest rates may remain unchanged to give greater certainty to borrowers.

Many economists expect that Mr. Carney voted in favor of more quantitative easing, the Bank of England’s bond-buying program, at the two-day rate-setting meeting that started on Wednesday. But they also expect that he was outvoted, just as Mr. King was last month, amid some timid signs that a recovery is taking shape. The central bank will release minutes of the current meeting next month.

After barely avoiding a triple-dip recession this year, the British economy showed signs of improvement in June. The services sector unexpectedly grew at its fastest pace in more than two years, according to data from Markit Economics and the Chartered Institute of Purchasing and Supply. The manufacturing and construction industry also improved last month.

The housing market also showed signs of continued improvement. Approvals for home loans granted by banks rose more than expected to the highest level since 2009 in May, according to figures provided by the Bank of England. The average price for a home continued to increase in June, led by London, according to Hometrack, a research concern.

“The data has been stunningly good,” David Tinsley, an economist at BNP Paribas in London, said before the announcement Thursday. But he also said that it was too early to say the worst was over for the British economy and that he expected the Bank of England to expand its stimulus program in the future. “The situation is probably still more fragile than it appears,” he said.

Economic growth is still expected to remain weak as long as troubles on the Continent, Britain’s largest export market, persist and austerity measures continue to be a drag on the recovery. George Osborne, the chancellor of the Exchequer and the architect of Britain’s austerity program, last month announced additional spending cuts, including more public sector job cuts.

Real disposable household income fell 1.7 percent in the first three months of this year, the biggest drop since 1987, according to the Office for National Statistics. Inflation continues to hover above the central bank’s 2 percent target at 2.7 percent just as many consumers had their salaries frozen.

In another sign that not all is well among British consumers, Nicole Farhi, the upmarket fashion label, filed for a form of bankruptcy protection on Wednesday, the latest British retailer to face serious trouble as demand dwindles.

Affirmative Action Case Is Sent Back to Lower Court

The 7-to-1 decision avoided giving a direct answer about the constitutionality of the program, from the University of Texas at Austin, which will allow it to continue for now. But the justices ordered an appeals court to reconsider the case under a demanding standard that appears to jeopardize the program.

The ruling was simultaneously modest and significant, and its recalibration of how courts review the constitutionality of race-conscious decisions by the government will reverberate beyond higher education.

The brief decision, issued eight months after the case was argued, was almost surely the product of intense negotiation among the justices.

The compromise that the majority reached was at least a reprieve for affirmative action in higher education, and civil rights groups that had feared for the future of race-conscious admission programs were relieved. But conservatives and other opponents of the current version of affirmative action vowed to use the court’s ruling as a road map to bring future cases.

Justice Anthony M. Kennedy wrote the majority opinion, joined by the four members of the court’s conservative wing — Chief Justice John G. Roberts Jr. and Justices Antonin Scalia, Clarence Thomas and Samuel A. Alito Jr. — and two of its liberals, Justices Stephen G. Breyer and Sonia Sotomayor.

Only Justice Ruth Bader Ginsburg dissented, writing that lower courts were correct to uphold the Texas program. Justice Elena Kagan disqualified herself from the case, presumably because she had worked on it as solicitor general in the Obama administration.

The decision did not disturb the Supreme Court’s general approach to affirmative action in admissions decisions, saying that educational diversity is an interest sufficient to overcome the general ban on racial classifications by the government. But the court added that public institutions must have good reasons for the particular methods they use to achieve that goal.

Colleges and universities, Justice Kennedy wrote for the majority, must demonstrate that “available, workable race-neutral alternatives do not suffice” before taking account of race in admissions decisions.

That requirement could endanger the Texas program when it is reconsidered by the United States Court of Appeals for the Fifth Circuit in New Orleans. The university’s program admits most undergraduates under race-neutral criteria, accepting all Texas students who graduate near the top of their high school classes. But the university also uses a race-conscious system to choose the remaining students.

Courts reviewing government programs that make distinctions based on race subject them to a form of judicial review known as “strict scrutiny,” requiring the government to identify a compelling interest and a close fit between means and ends. Justice Kennedy’s opinion focused on and tightened the second part of the test.

“Strict scrutiny,” Justice Kennedy wrote, “does not permit a court to accept a school’s assertion that its admissions process uses race in a permissible way without closely examining how the process works in practice.”

Courts reviewing affirmative action programs must, he wrote, “verify that it is necessary for a university to use race to achieve the educational benefits of diversity.” That requires, he said, “a careful judicial inquiry into whether a university could achieve sufficient diversity without using racial classifications.”

Justice Ginsburg, who announced her dissent from the bench, said the race-neutral part of the Texas program worked only because of “de facto racial segregation in Texas’ neighborhoods and schools.”

The case, Fisher v. University of Texas, No. 11-345, arose from a lawsuit filed by a white woman, Abigail Fisher, who said the university had denied her admission based on her race.

In a statement issued Monday, Ms. Fisher said she was “grateful to the justices for moving the nation closer to the day when a student’s race isn’t used at all in college admissions.”

This article has been revised to reflect the following correction:

Correction: June 24, 2013

An earlier Web address and page title misstated the Supreme Court’s ruling. As the headline correctly noted, the justices sent the case back to a lower court.

Wall Street Ends Lower on Central Bank Fears

Stocks slumped on Tuesday after the Bank of Japan declined to take additional stimulus measures, a move that increased investors’ worries about the eventual decline in central bank support that has bolstered an equities rally.

At the end of Wall Street trading, the Standard & Poor’s 500-stock index was down 1 percent in afternoon trading, the Dow Jones industrial average was off 0.8 percent and the Nasdaq composite was 1 percent lower.

The Bank of Japan kept monetary policy steady at the end of its two-day meeting, holding off on taking fresh steps to calm bond market volatility. Unhappy traders sent the Nikkei down 1.5 percent.

The lack of additional action rattled investors, underscoring worries about what would happen when the stimulus programs eventually go away. At the same time, nervousness remains over when the Federal Reserve may slow its measures, which have been a significant driver of this year’s stock market rally.

“This market has been fed by extremely supportive government policies around the world,” said Richard Meckler, president of the investment firm LibertyView Capital Management in Jersey City. “You’re getting to that period where investors have to recognize that these policies are beginning to wrap up.”

In Europe, the broad FTSE Eurofirst 300 index of top shares, which has shed 5 percent in the previous 12 trading sessions, ended Tuesday’s session 1.2 percent lower.

But United States Treasury prices turned higher on Tuesday, as the benchmark 10-year Treasury note, erasing a modest loss, was up 6/32 to yield 2.19 percent. The 30-year Treasury extended a gain to 24/32, allowing its yield to ease to 3.33 percent.

Shares of Lululemon Athletica slumped more than 17 percent after the company’s chief executive said she would step down.

SoftBank said it would raise its offer for Sprint Nextel to $21.6 billion from $20.1 billion. Sprint was up 2.4 percent.

The S.&P. 500 is up more than 15 percent since the start of the year, but markets have been bumpier since comments from the Fed chairman, Ben S. Bernanke, last month sparked uncertainty over the central bank’s timeline for slowing its $85 billion a month bond purchase program.

While the Bank of Japan left the door open to taking fresh steps to calm markets if borrowing costs spiked again, it did not appear to assuage investors. “The B.O.J. took some big steps and had some big changes but now that they’ve done that, the market is looking for even more,” Mr. Meckler said.

Seasonality was also playing a part in Tuesday’s weakness as equities tend to have less direction in the summer months, he said.

Shares in the Dole Food Company rose 22 percent after Dole received an unsolicited buyout offer from its chief executive.

The Catamaran Corporation climbed 11 percent after it signed a 10-year agreement with the Cigna Corporation.

Boeing raised its 20-year forecast for demand, saying airlines will need 35,280 new airplanes worth $4.8 trillion as the world’s fleet doubles. Boeing shares fell 0.5 percent.

The yen extended its rally after the Bank of Japan’s lack of action, and the dollar traded as low as 95.68 yen for a 3 percent loss on the day.

The euro briefly traded above $1.33, but gains were pared headed into Europe’s stock market close, with the euro last trading at $1.3274, up 0.1 percent on the day.

In the debt market, investors pulled out of the riskiest assets, sending Greek 10-year bond yields up 75 basis points, to 10.22 percent. Portuguese equivalent bonds rose 34 basis points, to 6.59 percent.

The Greek government has failed to find buyers for its state-owned natural gas company, threatening the privatization goal set under the country’s bailout.

Visa to Lower Some Card Fees in E.U. Antitrust Probe

Lapses of security were negligible compared with errors that let terrorists thrive.

Room for Debate looks at whether a court rejection of race preferences could create a more progressive future.

What I learned about being a writer from composing thank-you notes.

McDonald’s Reports Lower Sales in April

The company, which had warned of a decline last month, said same-store sales fell 0.6 percent globally. That reflected an increase of 0.7 percent in the United States, where it recently introduced its chicken McWraps.

But sales fell 2.4 percent in Europe, its biggest market by revenue. The company said it was seeking to improve results in the region by emphasizing “everyday affordability” and keeping stores open longer.

In the region encompassing Asia, the Middle East and Africa, sales were down 2.9 percent. The chain blamed the impact of the avian flu in China for the decline, as well as softness in Japan and Australia.

Yum Brands, which owns KFC and is China’s biggest Western fast-food company, has been hurt by the new strain of avian flu as well. It warned late last month that sales at established restaurants in China were down about 30 percent in April. Yum is also trying to recover from a controversy over its chicken suppliers that surfaced late last year.

After years of outperforming rivals, McDonald’s has been struggling to increase sales as it faces intensifying competition, changing eating habits and weak growth in the broader restaurant industry. Late last year, the company reported a decline in its monthly sales figure for the first time in nearly a decade. Soon after, the company ousted the head of its American division.

Sales at restaurants open at least 13 months is an important measurement because it strips out the impact of newly opened and closed locations.

McDonald’s, which has more than 34,000 locations around the world, noted that it had one fewer Sunday and one more Tuesday in April of this year compared with last April. The chain’s sales are generally stronger on weekends.

Merck Posts Lower Profit and Cuts Forecast

Merck & Co. on Wednesday posted disappointing first-quarter results and cut its earnings forecast for the year. But the world's third-largest drugmaker predicted that things would soon improve.

Merck was slammed by two factors plaguing most of its rivals: growing competition from generic drugs and unfavorable exchange rates.

Major drugmakers in recent years have been hurt by an unprecedented wave of patent expirations on brand-name drugs that had brought in billions each year. This has enabled makers of generic drugs to grab customers with cheaper, copycat versions.

Additionally, pharmaceutical companies are being pinched by the dollar gaining ground overseas. Since drugs and other products are bought in local currencies, when the dollar's value rises, revenue from those countries falls.

Merck, which is based in Whitehouse Station, N.J., said its revenue was reduced by 2 percent because the dollar rose sharply against the yen in Japan — a key market — and against some other currencies.

That and all the generic competition combined to reduce Merck's revenue by 9 percent. Net income fell 8.3 percent.

CEO Kenneth Frazier said he expects better results in the second half of the year. And he noted that Merck has five drugs under review by regulators, including a promising insomnia medicine called suvorexant.

"We fell short of our expectations for the top line," Frazier told analysts on a conference call. "We knew that 2013 would be challenging, but we are confident in Merck's future."

This isn't the first time generic rivals have cut Merck's revenue, but it might be the worst.

In the first quarter, recent generic competition slashed sales of baldness treatment Propecia, allergy pill Clarinex, migraine drug Maxalt and, worst of all, Singulair. The asthma and allergy pill had been Merck's top seller for several years, but its U.S. patent expired last August. Most patients quickly defected to the slew of much-cheaper generic versions.

As a result, Singulair plunged 75 percent in the first quarter, down by $1 billion to $337 million.

"We haven't seen such rapid loss (in sales as) we've seen with Singulair," said Adam Schechter, Merck's head of prescription drug marketing.

Still, analysts seemed more concerned that sales of Type 2 diabetes pill Januvia declined by 4 percent to $884 million.

Januvia is now Merck's biggest seller and a crucial driver of growth. Revenue from Januvia had been growing rapidly, fed by the worsening global epidemic of obesity-related diabetes, but the company said wholesalers reduced inventory in the first quarter.

"The market is very competitive," Schechter added. "We are seeing rebate and pricing pressures as newer competitors seek to increase their market share" by offering health plans bigger discounts and rebates.

Merck said Wednesday that many sales representatives who promote multiple drugs to doctors now will focus solely on the Januvia franchise. Executives predicted mid-single-digit revenue growth in the U.S. and higher growth elsewhere for the rest of the year.

Merck on Monday announced a partnership with Pfizer Inc. to develop a diabetes drug that works differently than Januvia, as a solo treatment and in combination with other drugs. Management said Wednesday that the drug could complement Januvia, as most diabetes patients must add additional drugs over time to control blood sugar, before having to start insulin shots.

Overall, revenue in the first quarter was $10.67 billion, down from $11.73 billion. That's well below the $11.11 billion analysts anticipated.

Total prescription drug sales fell 12 percent to $8.89 billion. Sales of veterinary medicines rose 2 percent to $840 million and sales of consumer health products such as the Coppertone sun care line increased 3 percent to $571 million.

Despite the revenue declines, Merck noted strength in revenue from some of its drugs: Simponi and Remicade for immune disorders, HIV drug Isentress and vaccines, particularly Gardasil for preventing sexually transmitted diseases. Revenue from emerging markets such as China also was strong.

Merck earned $1.59 billion, or 52 cents per share, down from $1.74 billion, or 56 cents per share, a year earlier. Excluding $992 million in one-time items, mostly acquisition and restructuring charges, profit was down 15 percent to $3.59 billion, or 85 cents per share. That was a nickel better than analysts expected.

Frazier said the company's stepped-up cost cutting kept the bottom line from sagging even more during the quarter.

Meanwhile, Merck said it now expects 2013 earnings per share of $3.45 to $3.55, excluding one-time items. In February, it forecast $3.60 to $3.70 per share.

Merck also announced plans to buy back up to $15 billion in shares, half in the next 12 months. That's on top of $772 million in share repurchases from January through April under a prior buyback that has another $1.1 billion to spend.

Frazier said the timing of the buyback was coincidental. Other drugmakers likewise have been buying back shares, although drug stocks have had a significant run-up in the last year or so after languishing for several years. Merck shares climbed from just under $30 in August 2011 to a high of $48.79 last month — barely half the October 2000 all-time high of nearly $94.

A huge sell off cut Merck's stock price by 5.1 percent in premarket trading before bargain seekers pushed it back up somewhat. Shares closed down $1.32, or 2.8 percent, at $45.68. More than 37 billion shares changed hands, more than double the average daily volume.

___

Wall Street Closes Lower as Earnings Reports Begin

Stocks trading on Wall Street ticked lower on Tuesday as an earnings season that is expected to show sluggish corporate growth got under way.

The Standard & Poor’s 500-stock index closed 0.3 percent lower, the Dow Jones industrial average lost 0.4 percent and the Nasdaq composite index fell 0.2 percent.

Over the next couple of weeks, reports on fourth-quarter profits are expected to come in above the previous quarter’s lackluster results, but analysts’ current estimates are down sharply from where they were in October. Quarterly earnings are expected to grow by 2.8 percent, according to Thomson Reuters data.

German data showed industrial orders fell more than forecast in November because of a sharp drop in demand from abroad, reinforcing concerns that Europe’s largest economy may have contracted in the fourth quarter of 2012.

“I’m surprised futures are holding up, given the relative disappointment that German data showed, but I think all eyes are on the beginning of earnings season,” said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.

European shares ended mixed after the German report, with the DAX index in Frankfurt down 0.5 percent and the CAC 40 in Paris up slightly.

Monsanto shares rose 2 percent after the world’s largest seed company raised its earnings outlook for fiscal 2013 and posted strong first-quarter results.

Shares of the restaurant-chain operator Yum Brands fell 4.2 percent. On Monday, the company, which owns KFC, warned that sales in China, its largest market, shrank more than expected in the fourth quarter.

Vodafone shares rose 2 percent in London after its American partner in the joint venture Verizon Wireless said it would be “feasible” to buy out the British group.

Sears Holdings shares were 6.4 percent lower a day after the company said its chief executive would step down for family health reasons.

GameStop shares fell 6.3 percent after it reported sales for the holiday season and cut its guidance.

Consumer Prices Fall 0.3% on Lower Gas Costs

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As Housing Market Strengthens, Prices Rise at Lower End

The Standard & Poor’s Case-Shiller index for July showed an annual gain of 1.2 percent in the price of single-family homes across 20 cities. Prices rose 1.6 percent from June, the third month in a row that all 20 cities posted month-over-month gains.

However, in four cities, including New York, prices are still down from a year ago. In New York, prices increased 1.2 percent from June but fell 2.6 percent from July 2011. Atlanta, Chicago and Las Vegas also showed year-over-year declines.

Still, price increases showed up even in the cheapest homes.

Luxury homes never lost as much value as lower-end houses, and their prices have shown more strength in the nascent recovery. But now, the gap between price gains in the higher end of the market and the lower end has narrowed considerably, according to data from Zillow, a real estate Web site that divides homes into three price groups.

“It’s less that the top tier is cooling than that the bottom tier is strengthening,” said Stan Humphries, the chief economist at Zillow. “The bulk of the recovery is due to the changes in the bottom and middle tiers.”

Even in Las Vegas, lower-end homes ticked up in price, which may be good news for sellers but can be a hurdle for buyers. Mark Graham, a youth pastor who has been house-hunting for his family there for months, said buying a home for less than $150,000 can be a challenge.

“Houses are going on the market and within a day have multiple offers already on them,” Mr. Graham said, adding that most of the offers were from investors who don’t need financing. “It’s more or less a heartbreaking market, because you get your heart set on a house, and then someone walks in with cash.”

Not every market is showing improvement on the low end, according to Case-Shiller. Atlanta and Chicago were still lagging, but in places like Boston and San Diego, the bottom third of houses were performing much more strongly.

“The majority of the cities have been more like Boston and San Diego,” said Maureen Maitland, vice president of indexes for S.&P. Dow Jones Indices, which produces the Case-Shiller index.

In Phoenix, which has shown the strongest recovery in house prices of the 20 cities surveyed, the lowest third — homes under $127,000 — showed gains of 33.5 percent between July 2011 and July 2012, while the top tier (above $211,000) posted an 11.5 percent increase in the same period. The price cutoffs for the tiers vary by city.

Prices have been bolstered by a decline in the number of foreclosure sales and strong interest from investors, who are buying up low-priced properties and converting them to rentals.

In another optimistic economic sign, consumer confidence rose in September to its highest level since February, according to a report released Tuesday by the Conference Board, a private group.

  The consumer confidence index hit 70.3 points in September, well above economists’ expectations of 63 and a significant improvement from the upwardly revised level of 61.3 in August.