Another stealth rally led by financials took the S&P 500 up 2% helped by a turbo boost in the last 90 minutes as The Guardian reported that France and Germany agreed to boost the rescue fund.Oil prices rebounded driving energy shares higher. Some pundits as well as EU officials were skeptical of the Guardian news and a larger bailout to $2T.

Cyclicals, financials and energy were major winners today up more than 2% whereas safer sectors like healthcare, utilities and defensive stocks were laggards. Treasuries were off with the TLT (20 Yr. Tsy ETF) down 0.62%. Biotechnology stocks were mixed today and over the past 5 trading days the biotech sector (IBB) has been lagging tech and internet stocks by about 2.5%. Over one month this divergence is more than 4% . One factor in the underperformance of biotech is that smaller cap more speculative biotech stocks are under performing and the tools/diagnostics sector are still weak from the Illumina (ILMN  $26.63) earnings shortfall.

The past 3 months have been quite volatile and although the overall market is about flat YTD many stocks have severely corrected. Many roller coaster moves and three bottoms at the 1100 level on the S&P have made investors cautious. Here is  a summary of our Life Science assumptions and positions since mid-September:

  1. We urge caution in tools and diagnostics at least until some clarity from Q3 earnings. Today our index was up 1.4% but many stocks are at their lows for the year.

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