Update-2 10/30…10:30a EDT Rally or not? I will post tomorrow to see if rally holds from gloomy sentiment driven by MACRO. Stocks we follow that are up on opening: ABBV, LLY, MRK. SMID biotech and MEDTECH stocks are still not tradeable: DHR an TMO are red again this morning. Healthcare is a sector laggard. Tech is a leader. Treasury re-funding news later today.
XLV at 123 after six month sell-off.
Update-1 10/27/23…Reset expectations next week. Higher rates for longer FED theme hits equities. And MedTech markets continue to be rocked by obesity drugs. Following large caps are trading near or at 52 week lows: BMY, BIIB, PFE. IHI the US medical device ETF is at 52 week low at $44 handle.
Worse S&P 500 sectors for week were Energy down 6.15% and S&P 500 healtcare down 3.87%.
- IBB down 4.06% for week, XBI down 4.18% , XLV. down 3.84% QQQ down 2.62%.
- MRK earnings for Q3 were good: Revs of $16B led by vaccines and oncology; EPS 2.13. Strong pipeline…..but stocks was flat at $102 handle?
- ABBV Q3 Rev as Humira revs decines; EPS of 2.95 a decline of 19.4%, aesthetic sales also light….stock was down 4.99% for week.
- More studies may be needed for CRISPR/Vertex sickle cell gene therapy.
- Lilly gets approval for ulcerative colitis drug.
Pivotal Week Coming Up-Can Healthcare Stocks Overcome MACRO Headwinds?
- Biotech at 3 year lows with IBB at $117 handle down 4.73% since 10/23/20; XBI at $66 handle down 4.7% since 10/23/18…5 years loss.
- SMID Cap stocks are deemed too risky for traders. Needs M&A catalyst.
- Big Cap earnings week features market leaders: MSFT, META, AMZN, then energy,GDP running at 3.6%; MRK, ABBV, SNF.
The up-coming quarter GDP is expected to hit 3.7% which has brought the FED dialogue to “higher rates for longer” that might lead us to a recession in 2024. So watch the yield on the 10 Year TSY now at 4.924% but needs to stay below the 5% range. Lately the market moves down on higher TSY yield which also reacts to the dollar and geopolitical events. But if GDP is tracking higher that could be better for stocks.
Now that we seem to be “free” from the policy issues of Medicare pricing the healthcare market can turn to earnings, products and trends within subsectors. The hot issue affecting many stocks is the huge impact of diabetes and obesity drugs. Now that the pandemic is in the rear view mirror, vaccines and diagnostics revenues are lagging and medical procedures are apparently reduced because of weight loss drugs. So we have two major sectors within healthcare with more limited growth .The current earnings reports should help clarify these trends. Lilly (LLY) stock is up 59.81% YTD , Novo Nordisk (NVO) up 42.29% YTD while important MedTech ETF (IHI) Is down 12.25% YTD. So we have the biggest Health/Science technology sectors represented in funds big losers in 2023: FSMEX down 13% YTD and PRHSX down 6.13%YTD.
Some stocks that we have mentioned recently for new buys are : ABT, BDX, BSX, and GEHC. We recently summarized our focus stocks that should be in a diversified Healthcare Portfolio.
Two stocks on our Focus list that are reporting this week are : Abbvie (ABBV) and Merck (MRK). Both stocks offer good entry points and good value but have had issues lately that should be clarified at earnings reports.
It would seem that M&A would be a catalyst to get traction in SMID biotech stocks. You can look at a portfolio we posted earlier in the year when there was some momentum. We lightened up small caps in FEBRUARY.Until we get through earnings and this period of uncertainty stick with domestic oriented large cap stocks like providers (UNH) and large cap drug stocks which can still be impacted by higher rates. Latest: Roche to buy Telavant from Roivant for $7.1 B. for an IBD drug.
Technicals at the cusp of S&P500 4200.