S&P Sells Off 2.94%-Caution Comes Back as Market is Down 4% in 3 Trading Days
Something happened, but maybe we were just reminded that the economic picture is still grim and monetary policy has done what it can. Europe is still a time bomb with funding for Greece not resolved and even Italy on the ropes.Gridlock in Congress is now exacerbated by feistiness from Boehner & Co. assaulting the FED and it is highly unlikely that we can even get fiscal policy to help out. Moody’s piled on today downgrading the debt of Bank of America and Wells Fargo. Banks are now trading at a discount of cash per share. The TSY 30 Year yield is now under 3% after today’s FED action to buy long term maturities and sell short term. Gold was off $25 down to $1785. Bernanke today reminded us of the significant risks to the economy.
The hot spot in the market is still technology especially mobile and software. Oracle (ORCL $29.54) and Apple (AAPL $412) are both still up for the week. IBM ($173) barely blinked today off 1% . The weak sectors were industrials, energy and materials directly correlated with economic growth.If the dollar continues to rally these sectors will remain weak. Another bellwether, transports were down 4% and 15.4% for the year.FedEX was down 3.6% today. Arch Coal (ACI $16.12) was down 10% and down 54% YTD.
Biotechnology Bull Market is Still Intact: Less Sensitive to Macroeconomic Headwinds
Over the past few weeks we thought healthcare could be a good place to hide from this roller coaster market. Most of our recent reiterated biopharma picks have done well since August 22:
Alexion (ALXN $65.71) up 30,2%
Cubist (CBST $35) up 8%.
Optimer (OPTR $16.77) up 111%.
Regeneron (REGN $70.28) up 29.2%.
Seattle Genetics(SGEN $20.05) up 33% .
Viropharma (VPHM $17.93) up 2.4%.
For a broader portfolio position in healthcare including devices and services we recommend the XLV up 1.97% since Aug 22 and 3.5% YTD. Small cap life science stocks are still risky especially if they need to raise cash over the next year. Life science tools and diagnostics have not come back significantly so larger cap biopharmaceuticals look better especially with the M&A potential of big pharma.Leerink Swann put out a positive report with news that the Senate proposed a $30.5B NIH budget for 2012 a cut of only 0.7% from 2011, however the Super Committee budget process is still a concern.Celgene (CELG $63.80 ) was not on our August list and it is a laggard but up 7.88% YTD. As detailed in Investor Uprising, Celgene has good relative value with potential revenue drivers ahead.
So the bottoming process is with us again and the 2011 S&P low has been at the 1025-1050 level.