Merck sinks back below $80 despite Trump teasing 'very big announcement'

Merck (MRK) is losing its stride on Tuesday as the broad US stock market gives up gains acquired during a strong rally over the past two weeks. MRK shares were the worst-performing in the Dow Jones Industrial Average (DJIA), sinking as much as 4.8% at the time of writing. Merck is dealing with heavy uncertainty regarding whether the Trump administration will add additional tariffs for pharmaceuticals in light of the US President's belief that pharmaceuticals should be produced domestically.

Trump excited investors briefly on Tuesday when he hinted at a coming announcement during his meeting with the new Canadian Prime Minister, Mark Carney. But the market quickly lost interest when the President hinted that it wouldn't necessarily be related to trade.

"We're going to have a very, very big announcement to make," President Trump told reporters. "Like, as big as it gets, and I won't tell you on what, and it's very positive. It is really, really positive, and that announcement will be made either Thursday or Friday or Monday."

The S&P 500, the Dow Jones, and the NASDAQ all moved between 0.8% and 1% lower by mid-afternoon. Palantir (PLTR) stock surprisingly sank more than 13% despite laying out strong guidance during its quarterly earnings call late Monday.

Merck stock news

President Trump signed an executive order on Monday that would impose further pressure on foreign manufacturers of pharmaceuticals, a policy that might increase costs for US pharma giants who outsource their production to foreign firms.

Trump's EO directs the US Food & Drug Administration to reduce the time it takes to approve pharmaceutical production plants in the US. Additionally, the order directs the agency to increase the fees it charges foreign manufacturing plants for inspections and to step up enforcement of active-ingredient source reporting by foreign producers.

Taken together, these directives will likely increase costs for foreign pharma producers, who will need to charge higher prices to their US clients.

Trump also singled out the Environmental Protection Agency (EPA), which he said needs to streamline its approval process for pharma factories. Trump has said the current length of time to build a pharmaceutical plant in the US can last from five to ten years.

This directive gives pharma investors pause, because it means that Trump is probably serious about raising tariffs on foreign-sourced pharmaceuticals and ingredients, as he claimed in mid-April. On Monday, he told some reporters that tariffs would likely be announced for the pharma industry over the next two weeks.

So far, pharmaceuticals have been one of the few industries to gain an immediate exemption from tariffs. But Trump told reporters in mid-April that in the “not too distant future" that will change in order to bring pharma manufacturing back to US shores. In response to questions surrounding his eventual tariff level, Trump said at the time, "The higher the tariff, the faster they come.”

Merck recently broke ground at a $1 billion production facility in Wilmington, Delaware. The nearly half-million square feet plant is the future home of Keytruda production. Keytruda is Merck's leading drug and one of the most successful drugs used to treat cancer globally. Completion of the plant is still several years away.

Merck stock forecast

Merck stock has been in a downward spiral for a while, so shareholders and curious bulls probably wonder where the sell-off ends. It's hard to say, of course, but several levels stand out on the weekly chart below.

First, the 78.6% Fibonacci Extension sits at $73.51. This level is quite close to the top of the $70 to $73 demand zone that pushed prices higher most of the time during the 2020 through early 2022 period. This makes it clear that a proper bet on the low point for MRK stock is probably less than 10% away from the current price action.

Of course, pharma stocks are at the mercy of the Trump administration like everyone else, but the chart below hints that an attractive buying point is nearby.

MRK weekly stock chart