Healthcare Stocks Are Lagging With Big Earnings Weeks Ahead…Update-2

Update-2…4/18…Sellers may be going away but buyers are still in hiding. XLV flat at $138.49, IBB down 0.99%, XBI down 1.385 at $83.48.UNH continues recovery up 2.96% at $493. Choppy tape with a reddish screen. Noted weakness in chip stocks with AMAT down 2.79% in a real “chipwreck” ,XLK down 1.1%.

• Abbott (ABT) drops after earnings beat  yesterday but holds $105 level today. Revenues hit $40B with raised full year guidance. Organic growth in MEDtech expected at 8.5% -10% in 2024. Cerevel Therapeutics (CERE) acquired by ABT not yet closed shows positive results with experimental PHASE 3  Parkinson’s  Drug.
• Rally started in am then faded at midday with some buying at end of day. S&P 500 down 0.22%. JNJ up 0.9%.

Update-1.4/16…..Market struggling with” higher for longer” rate dependent mode and just sitting on cash gives you 5%. So if S&P 500 cant hold further declines can be expected. As we said earlier T-bond sales are key to liquidity. Looking for bargains and yield in healthcare with XLV flat today at $138.68. Got back into United Health (UNH) today at around $450 level after drop from $500+ level. UNH recovers after earnings beat expectations. REVs of $99.8B grew $8B YoY, earnings of  $0.74 per share reflects hit from Change Healthcare Cyberattack.

• XBI down slightly to $85.61 and due for a rally so traders can check out our SMID list for gains.
• JNJ down over 2% to $144 shows 2.3% sales growth to $21.4B, little help with talc shadow.

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• Large caps are still favored considering MACRO concerns:LLY, MRK etc watch UNH earnings.
• SMID Life Science trades can be a good trading opportunity should momentum return.
• With increased volatility healthcare stocks are due for a comeback with XLV at $138.63.

Geopolitical concerns continue to roil markets, so now that I’ve stated what you already know what else is going on. MACRO concerns are back with massive US debt and recent weak treasury auctions all in contrast to a strong economy with persistent inflation. Now rates are up with 10yr Tsy yield spiking at 4.63% and FED cuts pushed out. We are about 3.5% off 2024 highs.

Healthcare stocks disappointed again last week with the XLV down over 3% and up only 1.65 % YTD, in a continued downtrend since March 28. Moreover the leadership, large cap biopharmas and United Health (UNH) down 10.25% over the past month and down 15.73% over one year are also waning. With the IRA (Inflation Reductio Act) coming into play in September we will see another negative item for drug stocks. And biotech stocks are not doing much better with the IBB down 5.94% for the month and 5.9% YTD ; and the XBI breaking  support off 2% today and 3.3% YTD at $86.34 from recent support levels of $90. The only big winners in 2024 YTD have been the diabetes and weight loss drugs LLY up 28.94% YTD, NVO up 20.36% and their smaller cap speculative plays. So why rebalance with new positions until we get earnings and guidance from the large caps coming up over the next 2 weeks.

Tech, Real Estate, Consumer Discretionary were weakest groups today.

We still see trading opportunities coming up from our Life Science trading list and had good gains from CorMedix (CRMD) up 41.21% over the past month and 23.99% with some profit taking at highs of $6.68. It is a volatile stock still in a short squeeze.  Keep in mind that this list of SMID speculative Life Science stocks is for experienced traders and they represent a collection of stocks that have an analyst following , good cash positions with strong momentum in the past. With biotech in the doldrums ETF investing won’t work with short term traders. So with speculative appetite still up we like short term trades that can also result in big long term gains. Let’s call it the innovation trade where AI meets genomics or some new theme.

This week we have important large cap earnings from Abbott, JNJ and United Health which should provide clues to important subsectors of healthcare. If earnings meet expectations over the coming weeks then we can return to healthcare as a portfolio anchor during volatile times.

Many large cap biopharmas took a hit recently: ABBV, PFE, REGN ,VRTX. A lot of volatility within the group.

Here is how our large cap biopharmas are doing now considerably off their highs as investors took profits or avoided due to MEDICARE price (IRA) and pipeline concerns.