Healthcare Stocks Lag Market On Drug Pricing

Hangover from EpiPen Pricing May Take Time to Clear

The healthcare sector was one of the worse performers YTD and down 3.24% in August as tracked by the XLV Health Care SPDR ETF. This underperformance lowers the YTD to only a 1% gain. Among the leading sectors YTD are Telecom (IYZ) up 11%, Energy (XLE) up 13.6%, Utilities (XLU) up 11% and Materials (XLB) up 12%.

Biotech stocks (IBB) were also down 2.94% for the month despite a nice recovery through most of Q3 until getting hit as collateral damage by the Mylan (MYL) EpiPen media downdraft. The IBB rallied from $250 to the $300 resistance level settling today at $280 near term support.

The XBI tracked the IBB down 3.19% for August and down 14.4% YTD.

Bellwether Celgene (CELG) was off 4.86% to $106.74 for August after hitting highs of $116 in early August. $106 is a key support level.
M&A is still a bullish factor in the market, maybe more so with price increases limited and inversions stopped.
Large caps earnings for Q2 were OK with no big surprises. Is there value?
Gene therapy stocks got hit today perhaps because large cap Novartis AG (NVS) is dropping development and cutting 120 jobs. BLUE, JUNO, and KITE were down.
Risk remains off but there is a good possibility that large fund managers will rotate money into healthcare where there is more growth potential.We are still betting on a fourth quarter rally so Rayno Portfolio stocks including IBB are still a hold.