“Don’t Fight the Fed”-cliches still work. Biotechs roar back near YTD highs.
Healthcare Stocks Not Immune To Bearish Mood
Crude Hits Lowest Level in Five Years
Biotech stocks joined the market sell-off again with all ETFs hit hard.The most volatile XBI was down 4.27% today and 3.55% over 5 days.Technical support is right about here $175.89, next at $170. During the mid-October swoon the XBI hit near $145. YTD the XBI is still up 35%. The FBT still leads the ETF pack up 42.6% YTD but down 5.66% over five sessions. The biotech correction of April-May 2014 brought the IBB and XBI to flat levels YTD certainly a volatile market and that brings to mind that they are a risky group of stocks beyond the large cap leaders with earnings and revenue growth. Even large cap biopharma stocks got hit today on good volume.
Many analysts think that the oil “free fall” signals other issues with global growth such as weakness in China and Europe. Commodities analyst and Editor of the Gartman Report may help grease the skids on the crude collapse by saying today on CNBC -TV( without analysis or rationale) that crude could hit $30. Moreover there is an underlying disinflationary trend with oil prices falling and strong demand for treasuries even at low yields. The oil panic could spill into high yield bonds tethered to drilling projects and emerging markets dependent on oil revenues. There is good and bad to this energy downdraft so cheaper energy for consumers is only half the story.
Biotech stocks are supported by strong fundamentals like M&A, technological breakthroughs and revenue growth . However the life science market is a niche dominated by traders and large institutions, unnerved by bad macro news, could decide to take profits early.
Caution on new buys in life science stocks. Look for support at Nov. 1 levels.