10/3 Jobs Report Clears Path for Q4 Rally 3:30P EDT
A more optimistic view of the economy was triggered by a steady gain in jobs with 248k added in August and unemployment dropping below 6% to 5.9%. But average hourly wages fell in September keeping wage growth rate around inflation at 2%. Little inflation is expected near term.
Life science stocks reversed course immediately from Wednesdays’ gloom with a broad rally. Large cap biopharma is leading the way today with our portfolio up over 2% and Alexion (ALXN) up over 6%. FBT was up 1.87% but flat over the week. Rayno Biopharmaceutical mid-caps also rallied with Pharmacyclics (PCYC) up 3% and Vertex (VRTX) up 3.83% .
Our recent small cap picks for a Q4 rally were more subdued but the iShares Russell 2000 (IWM) offers hope trying to find a bottom near the $108 level. Without an IWM rally we will have a hard time getting broad support for small cap life science stocks. Stocks to watch are : Celldex (CLDX), Foundation Medicine (FMI), Fibrocell Science (FCSC), Pacific Biosciences (PACB) and Karyopharm Therapeutics. Most of these stocks were trounced in September. Stay tuned for a small cap portfolio being developed for Q4.
Stocks Hit Session Lows at 1P EDT with NASDAQ Down 1.35%, QQQ down 1.35%
Bad news from usual suspects drive profit taking: Ukraine, Ebola, China, Hong Kong, South America and Europe
Stocks remain in a risk-off mode with choppy action throughout September despite numerous rallies. The S&P hit new highs in mid- September up almost 9% YTD but have been faltering since the Alibaba IPO (BABA). BABA is down 7.8% from the IPO daily trades. The biotech sector also hit new highs in September but was unable to pierce February highs YTD. Our top pick the FBT is still up 30% YTD.
In recent posts we offered the following commentary regarding life science stocks :
- Avoid small caps which are choppy and in a downturn mirroring the iShares Russell 2000 Index (IWM) trend down 6.33% YTD. But speculative small and mid caps have never recovered momentum from Q1.
- Hold large caps in our core portfolio of seven stocks up 25% YTD and still trading in aSeptember channel.
- Take profits on huge winners YTD : Achillion (ACHN), Exact Sciences (EXAS) and Illumina (ILMN). Today we will add Vertex (VRTX) to our profit taking list up 44% YTD but down over 5% today.Our mid-cap portfolio of 5 biopharmaceutical stocks is up 8% YTD but down 2% over 3 months.
- Avoid new buys in Diagnostics and Tools until we get through the Q3 earnings cycle.