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Merck overstated revenues from Medco unit

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Drug stocks may be under some selling pressure here in the United States after Merck (NYSE:MRK) $48.86 shares plunged to $42.95 in overseas trading after the drug giant Merck said it reported $12 billion in revenue over three years in its pharmacy-benefits unit, Medco, that it didn't collect. Merck said that its revenue-recognition policy conforms to GAAP (Generally Accepted Accounting Procedures). Shares of Merck (MRK) recovered somewhat from overseas trading at $46.90 on Instinet trading here in the U.S.

Ebay beats estimates, then bids for PayPal

Online retailer eBay Inc. (NASDAQ:EBAY) $60.58 posted second quarter pro forma earnings of 19 cents per share and revenue of $266 million, which was above the average analyst forecast compiled by Thomson/First Call of 17 cents and $264.3 million.

eBay (EBAY) then announced that it would acquire online payment specialist PayPal (NASDAQ:PYPL) $20.00 for $1.5 billion in stock. eBay shares are trading down 4.5% at $57.80 in pre-market action, while shares of PayPal (PYPL) rose 10% to $22.

Under the terms of the deal, which is expected to be immediately accretive to pro forma earnings, 0.39 shares of eBay (EBAY) will be exchanged for each PayPal (PYPL) share. Based on Friday's closing prices, the acquisition values PayPal (PYPL) stock at $23.61. PayPal (PYPL) went public in February at $13 per share.

Stock futures recovering, but speak of lower open

Stock futures have recovered from earlier morning lows but still speak of a lower open for stocks. S&P futures (sp02u) are currently trading down 4.2 points at 986.80. NASDAQ futures (nd02u) are down 10 points at 1,054 and Dow futures (dj02u) are lower by 60 points at 9,328.

Fair value for the NASDAQ-100 today is $1.15. That price will not change during the session. HL Camp & Company has their computers set for program buying at $2.00 and set for program selling at $-1.02. Fair value for the NASDAQ-100 today is $4.10.

Jeff Bailey
Senior Market Technician
Option Investor

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