Shares ended lower after getting off to a late start because of Perrigo, whose shares tumbled on Wall Street over the weekend and suffered a stampede of sell orders at the opening of the Tel Aviv Stock Exchange on Sunday.
By the end of the session, shares of the maker of generic, over-the-counter drugs had plunged 6.3% to NIS 388 on turnover of NIS 27.3 million. Perrigo was stung by a Goldman Sachs downgrade of its rating from Neutral to Sell in a research note issued to investors on Friday, which caused the shares to drop 5.8% to $103.85.
Goldman, which now has a $110 target price on the stock, said it expected Perrigo's sales to slow in the next several quarters.
Perrigo pushed down the benchmark TA-25 index, where the stock accounts for the maximum 10.45% weighting. The blue-chip index closed 0.5% lower at 1,217.76 points, while the broader TA-100 shed 0.6% to 1,079.18. Turnover was NIS 702 million.
The market was mostly lower, with insurance stocks leading the way. The TA-Insurance index ended down 1.2% at 1,200.91, with Migdal Insurance off 2.5% and Phoenix down 1.9%. The Oil and Gas index rose 0.7% to 317.69 and the TA-Communications Index rose 0.7% to 520.73.
Sentiment was also hurt by a preliminary treasury estimate for the 2012 budget deficit published on Sunday, which showed the shortfall equal to 4.2% of gross domestic product, more than double the original projection. Nevertheless, 10-year Shahar bonds were steady Sunday, ending up 0.06% to yield 4.03%.
European equities stalled on Friday, with weak economic data from the United States and concerns about the scope for more stimulus in China giving investors the excuse to lock in profits on a new-year rally to multi-month highs.
The FTSEurofirst 300 index provisionally closed 0.1% lower at 1,163.40 points, retreating from Thursday's two-year peak of 1,170.29.
The U.S. trade deficit unexpectedly grew in November, suggesting that fourth-quarter gross domestic product growth in the world's biggest economy would likely be lower than previously expected. Nevertheless, the three major Wall Street stock indexes ended flat to slightly higher on Friday, with the Dow Jones industrial average closed up 0.13%, at 13,488.43.
In currency markets, the euro rose to its highest level since April against the dollar on Friday in the wake of encouraging remarks from the head of the European Central Bank.
In Tel Aviv, Teva Pharmaceuticals led the most actives on turnover of more than NIS 48 million, and dropped 2.2% by the finish.
Ratio Exploration ended unchanged at NIS 35.40 on heavy volume of NIS 31.9 million. After a 50% run-up in the share price over the last year, Yigal Landau, a shareholder, sold about a fifth of his holding for NIS 28 million, the company announced Sunday, at 34.7 agorot each, about the same as the TASE traded price.
Although the TA-Biomed index contained its losses to 0.6%, ending at 824.27, Compugen and Clal Biotechnology were among the biggest losers on the TASE Sunday, falling 4% and 2.4%, respectively. On the other hand, Can-Fite jumped 17.4% to 42.6 agorot after Clal Finance began coverage of the drugs developer with a Buy rating and a target price of NIS 1.47, a premium of 330%.
Among technology stocks, Ceragon rebounded from sharp losses last week, prompted by a fourth-quarter 2012 earnings warning, and rose 6.2% on Sundayon the TASE to make it the biggest gainer among TA-100 stocks.
Reuters contributed to this report.