Update 12/18 Market Rockets to Records But Biotechs Left Behind

Ebullience reigned today stoked by tax cuts around the corner. Although many talking heads have said that the tax cuts are “baked in” it seems that a new view has emerged that equities still have room to run because of stock buybacks, capital investment, dividend yields and maybe a stimulus package for infrastructure. Tax plan optimism reigns although many analysts are still trying to call winners and losers.  With interest rates still low but with rate increases in 2018 equities beat bonds handily.

But healthcare and biotech stocks continued to lag with healthcare among the worst sector flat for the day while materials were up 1.46%, technology up 1% and NASDAQ up 0.84%.

  • Technicals for biotech do not look good unable to pierce December resistance and still ~10% below October tops.
  • IBB at 106 down 0.23%, XBI flat at 81.82, FBT down 0.41% at 122.68, XLV at 83.74 flat.
  • The current rally has too many investment alternatives to healthcare stocks: technology, materials, financials,small caps, International even blockchain speculative (Cryptos) stocks like Riot Blockchain (RIOT) and LongFin (LFIN).


Macro Headwinds Stall Biotech Rally and Healthcare Sector: XLV Down 1%

Red Screen Day With Few Big Gains: ASH Trade is Over

Technicals Deteriorate But Hold Positions For Early 2018 Rally

The healthcare sector was a loser today maybe because of tax reform as Republicans seek budget cuts from entitlements to help pay for corporate tax cuts. The ACA has been a major driver for healthcare stocks over the past 8 years because of more patients insured. Today on CNBC Jim Chanos said he believes that the Republican tax plan will hurt healthcare stocks. Biotech stocks stalled abruptly as traders raked in gains from the recent American Society of Hematology (ASH) Meeting: BLUE BPMC GILD GLYC JUNO etc. The XBI was down 1.93 % stalled near the $81 level.

In this week’s Barrons 2018 Outlook, two out of ten strategists said avoid the healthcare sector. Two strategists favored the sector. Nine out of ten favored financials.Healthcare was up over 20% YTD in 2018 while technology stocks were leaders up over 30% YTD.

Our new pick Celgene (CELG) held the $108 level.

We are still awaiting the final version and voting for the Republican Tax Reform plan to assess potential damage for biotech and healthcare stocks. A few Senators are also wavering in their support looking for changes.

Major sectors of the market were down today because of timing uncertainty and details for the Tax Cut legislation like financials, materials and small caps all weak. Another issue is whether some traders will take profits this month for tax reasons but at least the FIFO rule in the tax bill is out.

There were few winners among large and mid caps like CLLS up 3.5%, GWPH up 5.5%, TSRO up 1% and TEVA up 10.2% on job and dividend cuts.

Late this evening Merck announced that their Keytruda drug failed to meet its main goal of extending lives of patients with a type of gastric cancer.

The next major catalyst is the J.P. Morgan Healthcare Conference during the week of January 8, 2018. Maybe we will see some M&A deals.

XLV Health Care Select Sector SPDR ETF daily Stock Chart

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