Things got ugly today. The momentum stocks of the Nasdaq saw it the worst.
First, the scoreboard:
- Dow: 16,170.2 (-266.9, -1.6%)
- S&P 500: 1,833.0 (-39.0, -2.0%)
- Nasdaq: 4,054.1, (-129.7, -3.1%)
And now the top stories:
- It’s hard to say if there was any one event that triggered today’s sell-off. Overnight, China reported unexpectly weak export numbers. But those were largely explained away by artifical trading activity with Hong Kong and the unusually cold winter in the U.S. Perhaps it was the disappointing machine orders stats out of Japan.
- U.S. futures moved into the red a few hours before the U.S. markets opened. And strong labour market data couldn’t stoke a rally.
- Initial weekly unemployment insurance claims fell to 300,000, which was the lowest level since May 2007. “We’d love to proclaim these numbers as definitive evidence of a real downshift in the trend in claims, but it’s even riskier than usual to put too much weight on single observations at this time of year,” says Shepherdson. “The shifting date of the Easter holiday from year-to-year causes problems for the seasonal adjustments, so we need to see a few more weeks’ numbers before we can be sure where the trend now stands.”
- Today’s underperformance of the Nasdaq continues a trend which started on March 5 in what strategist Ed Yardeni dubbed as the “internal correction.” This correction is characterised as “money coming out of high-priced growth stocks and going into lower-priced value stocks,” he explained. The big losers have been Internet software and services companies, health care technology companies, and biotechnology companies.
- The biggest losers in the S&P 500 today were indeed the biotech stocks including Alexion Pharmaceuticals, Gilead Sciences, Vertex Pharmaceuticals, Celgene, and Biogen Idec. The iShares Biotechnology Index (IBB) fell by over 5%. Industry analysts have generally been bullish on the industry based on the long-term profit potential of drugs in the developmental and regulatory pipeline. “Large cap biotech is now trading at a 2015 and 2016 PE discount to the S&P500!” exclaimed Credit Suisse’s Ravi Mehrotra and Koon Ching in a recent note to clients.
- Big tech darlings also underperformed today. Netflix, Facebook, Google, and Amazon.com were all losers.
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