Update-2 Powell Reiterates Need To Fight Inflation
The FED raised rates 50 bpts and Powell said more rate increases are coming, ( but aren’t we getting close to the top?). Stocks ended lower,NAZ down 0.75%, with gyrations in last 30 minute of trading. It was pretty much as expected but the two day rally is over as investors digest the news. There appears to be a disconnect in the forecasted FED rate of 4.5-5% and the current 10 year Tsy yield of 3.55% trending lower and an inverted yield curve of the 2 Year Tsy yield of 4.25%. We are in a recession watch with 2023 GDP expected to grow only 0.5%.
- Biotech stocks were mainly weak but the IBB was up 0.54% to $136.73 and the XBI held up 0.33%. Large cap biopharmas were green with strength in MRK, PFE and VRTX .China is scaling backon zero COVID policies.
- Healthcare was up a tad, weak sectors were financials and materials.
- BNTX and MRNA remain strong.
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Update-1 Reversal Rally Ahead of CPI and FED
Stocks rallied sharply after 11a EST with all major averages up over 1.25%.Energy and TECH led the way.with the XLE up 2.62%. NYFED shows data that inflation has eased. Large cap leaders ABBV, BIIB, LLY. IBB up 0.79%,XBI up 2.51%, XLV up 1%. If inflation numbers tomorrow are deemed good then a huge ally could ensue.
- Amgen will acquire Horizon Therapeutics (HZNP) for $28B to bolster top line in rare disease play.
- Mid-Cap 2%+ movers: AGIO,BMRN,NBIX,RARE,SGEN,SRPT.
- Sector leaders: energy, utilities, technology, financials.
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- Concerns about higher rates and upcoming CPI and FOMC has even rocked defensive biopharma stocks.
- Some SMID speculative biotech stocks were volatile and down big.
- Only winners over past week were commodities and metals; silver, copper and gold. Big losers were small caps and energy.
It was a rocky, choppy, down week for diversified portfolios with most indices down over 3%. Healthcare portfolios fared better with the XLV down only 1.29% to $137.98 buoyed by a large position in UNH up 0.57% for the week. Merck (MRK) our top pick continues its strength up 7.08% for the month despite a 1.15% down week closing at $108.78. Large cap biopharmas held near their highs with our favorites a bit weak: ABBV down 0.37% to $163.06, BMY down 2.83% to $78.83, LLY down 3.67% to $360,REGN down 2.13% to $750, VRTX down 2.85% to $312.22. The IBB slid 3.92% to $133 but is still up 3.07% for the month.
The XBI equal weighted biotech ETF took a big hit down 7.16% for the week to $79.53. One of the big speculative losers were Mirati Therapeutics (MRTX) down 56.62% to $41.75 on analysts concerns about clinical data, FDA approval and M&A speculation.Several analysts have lists of takeover targets for the near term as drug pipelines get filled through deals. With all the crosscurrents from MACRO and pricey valuations you need to be nimble on trades. And we are not getting help from small caps. The ARKG was also down 7.97% for the week.The XBI should trade on technicals (note breaking of uptrend) over the next few weeks but we need to get past the FOMC announcement at midweek which tends to create the jittters for traders.
The American Society of Hematology Annual Meeting begins this week 12/9 and should provide considerable clinical news and Company updates. #ASH22. Overall a plus for biotech.
Note that the MedTech sector is starting to recover with the IHI up 1.81% for the month in a slight uptrend.
MACRO and technicals rule this week.
Healthcare Portfolio as of 11/12/22
Long ABBV, BMY, LLY, REGN,VRTX; MRTX XBI
| Model | ||||||||||||
| PORTFOLIO | ||||||||||||
| 2020 | 2020 | 2020 | 2021 | 2022 | 2022 | |||||||
| Stock/ETF | Ticker | Price | Wgt | Price | Price | 1 year | YTD | 30d | Price | 5 days | ||
| 10/25 | % | 12/31 | % Perf | 12/31/21 | % Perf | %Perf | %Perf | 11/12 | % Perf | |||
| iShares NAZ Bio | IBB* | 136 | 15 | 151.5 | 25.7 | 152.62 | -23.91 | -12 | 13.61 | 134.25 | 4.6 | |
| iShares Russell 2k | IWM | 163 | 5 | 196.4 | 18.3 | 222.45 | -24.24 | -15.98 | 11.44 | 186.9 | 4.6 | |
| Merck* | MRK | 80 | 10 | 81.77 | -10 | 76.64 | \17.86 | 27.82 | 7.59 | 97.96 | -1.25 | |
| United Health | UNH | 330 | 25 | 350.7 | 27.19 | 502 | 20.68 | 3.97 | 4.46 | 522 | -2.99 | |
| SPDR S&P Bio | XBI | 117 | 10 | 140.8 | 48 | 111.96 | -36.34 | -24.29 | 8.29 | 84.76 | 6 | |
| Healthcare SPDR | XLV | 108 | 25 | 113.4 | 14.71 | 140.89 | -3.51 | -5.51 | 8.68 | 133.13 | 1.77 | |
| T.Rowe Hlth Sci | PRHSX | n/a | 5 | 99.65 | n/a | 104 | -23.47 | -12.21 | 8.63 | 91.37 | 4 | |
| iShares U.S MedT | IHI | 50 | 5 | 54.83 | 65.85 | -25.91 | -21.21 | 8.83 | 51.89 | 5.81 | ||
| Tracking Comp | COMP | |||||||||||
| * | ||||||||||||
| ARK Genomic | ARKG | 93.26 | 61.24 | -60.55 | -40.84 | 14.18 | 36.23 | 11.44 | ||||
| FIDO Biotech | FBIOX | 25.18 | 19.35 | -33.57 | -16.59 | 5.63 | 16.14 | 6 | ||||
| FiIDO MEDtech | FSMEX | 76.15 | 83.18 | -33.96 | -26.74 | 9.17 | 60.94 | 10 | ||||
| DOW | DIA | 310 | 363.32 | \(12.6) | -7.03 | 15.57 | 337.79 | 4.21 | ||||
| S&P 500 | SPY | 379 | 475 | -17.48 | -161 | 11.4 | 398.51 | 5.89 | ||||
| NASDAQ-100 | QQQ | 315 | 397.85 | -27 | -27.62 | 9.59 | 287.96 | 8..8 | ||||
| Top Biopharmas | ||||||||||||
| Abbvie | ABBV | 35.22 | 10.9 | 6.11 | 150.16 | 3.36 | ||||||
| Bristol Myers Sq | BMY | 24.91 | 21.83 | 9.06 | 75.96 | -3.58 | ||||||
| Eli Lilly | LLY | 41.3 | 27.54 | 7.54 | 352.3 | -1.43 | ||||||
| Merck | MRK | 17.86 | 27.82 | 7..59 | 97.96 | -1.25 | ||||||
| Regeneron | REGN | 25.39 | 16.3 | -0.4 | 734.45 | -0.78 | ||||||
| Vertex | VRTX | 60.35 | 38 | -2.74 | 303.26 | -1.8 | ||||||