UPDATE: Biotech, pharma stocks rally after a roller coaster Monday
UPDATE: After a roller coaster day of trading that saw the Dow Jones Industrial index travel well over 4,500 points and whipsaw between a disastrous opening (when the Dow plunged nearly 1,100 points in the first minutes of trading) and a correction that nearly erased those losses later in the afternoon, the Dow, the NASDAQ, and the S&P 500 all closed down between 3.5% and 4% on Monday but then opened up big on Tuesday. The Dow closed 588 points in the red after a selloff that began last week, ostensibly spurred by fears of a weak Chinese economy (that country's stocks plunged 8.5%) and the specter of the Federal Reserve raising interest rates. But markets rallied on Tuesday morning, with the Dow opening up more than 300 points. The question is: Will the rest of the week be as turbulent for investors as the past 24 hours have been?
Biotech sector indices for both the Dow and the NASDAQ fell further than the broader markets on Monday, with the Dow Jones U.S. Biotech Index falling 4.72% and the NASDAQ Biotechnology Index falling 4.78%. Pharmaceutical shares were a little more stable and in line with the broader market drops, falling 3.92% on the Dow Jones Select Pharmaceuticals Index. On Tuesday, the Dow and NASDAQ biotech indices both opened up about 3%, slightly outpacing broader market gains.
Here's a list of major biotech and pharma stocks (by ticker), ranked by which companies' shares fell most dramatically on Monday (this is obviously an incomplete list of companies). Prometheon fell the most dramatically, while billionaire Patrick Soon-Shiong's recently IPO'd NantKwest, Abbott Labs, and Juno Therapeutics all fell more than 7% (on Tuesday, all of those stocks opened higher, with NantKwest gaining more than 5%). (Note: You can click on the table below to expand)
On the flip side, Valeant, Roche, and Kythera Biopharmaceuticals all barely dipped into the red by the closing bell on Monday (and opened higher on Tuesday). Kythera in particular seemed to buck the trend of big drops in shares for biotech companies.
Investors and industry observers will be sure to keep a close eye on how the markets behave in the coming days and weeks, especially after Tuesday's early rally. If shares continue to oscillate (and volatility continues to surge), the biotech sector in particular, which is filled with a healthy amount of speculation, could continue to take a beating.
- NOTE: THIS POST HAS BEEN UPDATED ABOVE. The Dow Jones Industrial, NASDAQ, and S&P 500 all plunged on Monday morning, falling anywhere between 4% and 6% in the opening minutes of trading in a massive rout. There has been a bit of a rebound since then, but the indices are still down 2% to 3%.
- The Dow fell more than 1,000 points in the first two minutes of trading before correcting to about a 350 point drop. In anticipation of the selloff, the NYSE invoked the so-called Rule 48 in an effort to smooth out volatility. The NASDAQ and Dow Jones biotechnology indices were both down about 4%, and big cap biotech stocks like Gilead, Celgene, Amgen, and Regeneron were down anywhere from 3% to slightly more than 5%. (UPDATED ABOVE)
- Market observers are speculating that the selloff is being driven by fears that China's economy may be faltering (China's stock market plunged 8.5%), as well as concerns that the Federal Reserve may finally raise rates.
While big one-day movements in stocks come with the territory, some fear that the selloff that began last week and continued on Monday will persist as part of a massive correction to recent market highs.
There were some encouraging signs as the Dow and NASDAQ recouped more than half of their losses within an hour of the opening bell. But in the end, major markets all fell towards the end of the day, shedding nearly 4% of their values. For biotech industry observers and investors, the volatility of the current market may call for a wait-and-see approach.
The question is: Will the major fluctuations persist? If so, investors may become increasingly skittish to back less-proven biotechs.