Wednesday: With P&G Up and Merck Down, Dow Holds Steady

Publish date:

By John J. Edwards III
Staff Reporter

Two big consumer-noncyclical companies are locked in a battle for the soul of the

Dow Jones Industrial Average

this midday. "Up!" pushes

Procter & Gamble

(PG) - Get Report

. "Down!" pulls


(MRK) - Get Report


As a result of that clash of titans, the Dow has been poking along with unremarkable gains and losses. Most recently it was mildly off. The broader

S&P 500

was close to break-even and the tech-stuffed

Nasdaq Composite Index

was up a little. The benchmark 30-year Treasury bond was flat.

"The tone of the market had been following the bond market at the open," said Edward Riley, chief investment officer at the

Private Bank at Bank of Boston

. "The rally in bonds is dissipating and so is the rally in stocks."

Procter & Gamble's strength came from Wall Street's enraptured reaction to the company's $1.85 billion cash deal to buy



, maker of


tampons. Procter & Gamble told


it expects no net dilution from the deal and will not take a charge on it.

Merck's weakness came from a slew of downgrades yesterday and today on the drug giant.

Alex. Brown


Merrill Lynch


Morgan Stanley

all cut ratings on Merck and raised ratings on



. Warner-Lambert's Lipitor cholesterol-lowering drug, co-marketed with


(PFE) - Get Report

, is seen as a threat to Merck's Zocor.

So does the equity recovery of recent days --

Abby Joseph Cohen

-fueled or not -- mean happy days are here again? Riley thinks not. He said the interest-rate picture remains negative in the short term, profits look like they'll be anemic this earnings season, inflation may rear its seldom-seen head and investors are diving for safe cover.

Riley continues to recommend a general asset-allocation strategy that calls for 60% equities, 35% fixed-income investments and 5% cash -- unlike

Smith Barney

strategist Marshall Acuff, who yesterday reportedly shifted his allocation plan to advise more cash (15% versus 10%) and less stock (45% versus 50%). That afternoon call got swallowed up in the late Cohen Effect surge, however.