Broad Rally Breaks 7 Day Slump Led By Energy, Industrials and Materials
But Momentum in Biotech is Broken
Momentum stocks are being sold after huge gains year to date. Lock-ups are expiring and the sentiment has shifted as even good earnings news somehow disappoints. No it is not a bear market in biotech just the second big sell-off of the year as biotech focused institutions rake in big gains. With Nasdaq stocks also weak it is hard for biotech to rally. Today the sector is up but off highs hit near the opening. The XBI is the trade to watch down 6.5% over 5 days but still up 28% YTD.
The April correction (IBB) took us down about 9% and we are now down about about 7.7% (IBB at 368.67) from July highs after correcting 9% at Friday's low. Vicious sell-offs occur even in a bull market. Other than the usual weak seasonality a constellation of events has changed the sentiment:
Leading the downdraft on Friday were momentum stocks in hot new technologies such as cellular therapy, CAR-T and immune-oncology, all promising breakthrough technologies in molecular medicine but early in the clinical development pipeline.
To really appreciate the volatility during this current correction look at bluebird bio Inc. (BLUE) down as much as 11% for the day to $137.5 after hitting a high of $194 on June 1. The stock was $167 on August 5. bluebird bio is a high profile, clinical stage biopharmaceutical Company focused in gene therapies for severe genetic and rare diseases. There are three key products in the pipeline but much of the excitement is about their LentiGlobin Beta-thalassemia product candidate in Phase 2/3.
