Investment Commentary – October 21st, 2015
Market Indices as of Market Close October 21st, 2015
Dow 17,168 (-3.67% YTD)
S&P 500 2,018 (-1.94% YTD)
NASDAQ 4,840 (2.20% YTD)
Global Dow 2,409 (52 week low 2,203/high 2,644)
10-year Treasury 2.03 (52 week low 1.64/high 2.50)
Gold 1,166 (52 week low $1,074/high $1,310)
Oil 45.22 (52 week low $39.22/high $81.61)
U.S. stocks surrender gains as Valeant drags on health-care sector
“The story of the day is Valeant and its spillover into biotech,” said Ian Winer, director of equity trading at Wedbush Securities.
Valeant VRX, +0.75% skidded as much as 40% after short-selling firm Citron Research alleged that the drug company is shipping products to its own subsidiary and then falsely claiming the revenue. Valeant has refuted the short-seller allegations.
The news weighed on the S&P 500’s health-care stocks with the sector down 1.3%.
The S&P 500 SPX, -0.58% shed 6 points, or 0.3%, to 2,0224, with eight of its 10 main sectors trading lower. The Dow Jones Industrial Average DJIA, -0.28% edged about 9 points, or less than 0.1%, higher at 17,224, while the Nasdaq Composite COMP, -0.84% slipped 28 points to 4,853.
FYI: The Valeant story is a tough pill to swallow but as of June 30th, 2015 our most aggressive portfolio had just a 0.78% holding in Valeant.
Week Ended October 16, 2015
Benchmarks mixed following last week’s strong gains
The major benchmarks ended mixed for the week, with the large-cap Standard & Poor’s 500 Index managing to build on its strong gain from the previous week, while the small-cap and mid-cap indexes struggled. The technology-heavy Nasdaq Composite performed best, helped by a bounce in biotechnology stocks after the topic of drug pricing did not feature prominently in the first Democratic presidential debate as some had feared. The NASDAQ remained the only major benchmark with a gain for the year to date.
Volumes light at start of the week
Investors appeared to take something of a breather following last week’s robust rally. T. Rowe Price traders observed that Monday’s trading volume was the second-slowest full trading day of the year. Trading volumes and price movements picked up as earnings reporting season kicked into higher gear later in the week, however. Disappointing bank earnings on Wednesday weighed on sentiment, as did retail giant Wal-Mart’s warning that its fiscal year 2017 earnings were likely to fall between 6% and 12%, partly because of wage increases.
Inflation data suggest Fed might hold off on raising rates…
Stocks bounced back on Thursday, although it was hard to identify a specific catalyst for the rally as earnings news remained mixed. The Wall Street Journal attributed the rally to data showing a drop in consumer prices in September, which raised hopes that the Federal Reserve would hold off raising rates until sometime in 2016.
Foreign stock markets closed higher for the week ending October 16, 2015 with the broad international measure, the MSCI EAFE Index (Europe, Australasia, and Far East), gaining 0.29%.
The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.