Worse August in a Decade Down 6%-Economic Data Still Foreboding and Macro Headwinds Remain
If you were on vacation for the month of August and reviewed your “balanced” portfolio today you might wonder what everyone was freaking out about. Treasuries were up big. The DOW just turned positive for the year and the NASDAQ is only down 2.77% YTD.
For the month however the NASDAQ is down 6.4% and has recovered more than half of its losses after taking two trips down to the 2300 level. The S&P got hit harder down 5.68% for the month and 3% YTD, holding two scary double dip lows a tad above 1100 and considerably above August 2010. The technical red line for the S&P remains at the 1100 level. Some analysts say we still need to test that low in SEP/OCT.
The QQQ outpaced the IBB for August down 5% compared to 7.4% for the biotech ETF. Remember the QQQ has large cap biotech weighting. If you were a trader you had many days to make money with daily moves of 2% or more and over the last week or so the market up 10%. Healthcare overall (XLV) was safer down 2%+ month to date. The ETF’s FBT and XBI were down considerably more than the IBB by 3+ percentage points. Many high-flyer mid-cap life science stocks were crushed: Ariad (ARIA) down 17%, Illumina (ILMN) down 16%,Targacept (TRGT) down 20%, and Vertex (VRTX) down 13%.As we said in an earlier post, biotech is still in a bull market that began early in 2009 due to M&A activity and new product flow. Although many pundits are caution on a volatile SEP and OCT ahead, Q4 is usually good for biotech.
Over the past week we reiterated buys in a number of beaten-up biotech stocks and Biomarin (BMRN), Cubist (CBST), Seattle Genetics (SGEN), and Viropharma (VPHM) are all trending up since early August lows. Only Biomarin shows a loss (5%) for August. Other solid performers for August are Alexion (ALXN), Amgen (AMGN) and Regeneron (REGN). Gilead (GILD) was down 5.8% tracking the S&P.
Many major economic milestones lie ahead: jobs data on Friday, the budget super committee meeting and deciding on the deficit budget within 90 days, the FED meeting and QE3 chat and Euro debt crisis talk. On the positive side estimate revisions on the S&P 1500 are very low.
Gold ($1824) is among the best performers for the month up 12% driven by the debt ceiling crisis, uncertainty on the Euro debt crisis and FED talk about QE3 or more dollars being printed. See Investor Uprising for details on the gold market.