U.S. Stocks Drop on Brent Bear Slump, Gold Rises: Markets Wrap


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Most U.S. stocks fell as oil’s worsening slump weighed on energy and industrial shares, overshadowing fresh rallies in high flying technology and biotech companies.

Brent crude slid beneath $45 a barrel to join West Texas Intermediate in a bear market as stockpiles in America remain above seasonal averages and Libya resumed some production. That sent energy shares in the S&P 500 Index to the lowest level in two months. The equity benchmark almost eked out a gain as chipmakers led a rally in its biggest component, tech shares. Treasuries were virtually unchanged after erasing losses, while the dollar slipped.

Oil’s slide into a bear market is showing some signs of spilling over into other assets, with energy junk bonds at the cheapest since November, though contagion remains largely contained. Persistently lower commodity prices raises the specter that inflation will have trouble rising toward levels central banks prefer even as the Federal Reserve reiterates its intention to tighten monetary policy.

The rebound in biotech comes on signs that the Trump administration has softened its stance on drug pricing and as breakthroughs such as Clovis Oncology Inc.’s cancer treatment renew investor interest. 

Read more: Liquor Titans to Coal Miners: the Chinese Stocks in MSCI’s Club

Here are some of the key events on the agenda:

  • Still to come on the Fed speaker list: Jerome Powell, James Bullard and Loretta Mester.
  • New Zealand’s central bank is expected to leave its benchmark interest rate at a record low when it meets on Thursday.

Read our Markets Live blog here.

And here are the main moves in markets:

Stocks

  • The S&P 500 Index fell 0.1 percent to 2,435.61 as of 4 p.m. in New York. Exxon Mobil Corp. and Chevron Corp. contributed the most to the decline..
  • The Nasdaq 100 Index climbed 1 percent, continuing its rebound from a two-week selloff. It’s still 1.8 percent from its June 8 high.
  • The Stoxx Europe 600 lost 0.2 percent, with financial shares leading the way.
  • The MSCI Emerging Markets Index slid 0.2 percent. 
  • Saudi Arabian equities jumped amid a palace reshuffle. Chinese shares rose after winning entry into MSCI Inc.’s emerging-markets gauge.

Commodities

  • Brent crude entered a bear market, plunging below $45 a barrel for the first time since November as skepticism that a supply glut will ease worsens. The world benchmark settled $1.20 lower at $44.82, down 22 percent from its January peak.
  • West Texas oil lost almost $1 to settle at $42.53. Futures tumbled more than 2 percent on Tuesday, touching the lowest since August.
  • Gold futures rose 0.2 percent to $1,245.96 an ounce after falling for five straight days.
  • Zinc rose the most in five months, leading other industrial metals higher amid signs of shrinking global supply.

Currencies

  • The pound grabbed the center of the G-10 currency stage for a second day, after remarks from Bank of England Chief Economist Andy Haldane contrasted sharply with the tone set by the bank’s Governor Mark Carney just the day before. Sterling rose more than one cent before paring gains to $1.2663. 
  • The Bloomberg Dollar Spot Index fell 0.1 percent after rising 0.3 percent on Tuesday and 0.4 percent the previous day. The euro climbed 0.3 percent to $1.1162 after two days of declines.
  • The yen was little changed at 111.421 per dollar, after gaining 0.1 percent on Tuesday.

Bonds

  • The yield on 10-year Treasuries was virtually unchanged at 2.16 percent, after declining three basis points on Tuesday.
  • Investors still aren’t demanding higher overall premiums for the riskiest corporate debt and the $18.4 billion iShares iBoxx High Yield Corporate Bond ETF has gained 3.9 percent this year, even as credit spreads for energy companies widened to the highest since September after crude slid below $43 a barrel.
  • The yield on U.K. benchmark bonds rose four basis points.

    Read more: http://www.bloomberg.com/news/articles/2017-06-20/oil-bear-market-to-hit-asia-stocks-china-in-msci-markets-wrap


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    Health Stocks Surge, Shrugging Off Uncertainty in Washington


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    There’s plenty of uncertainty about health policy in Washington, but on Wall Street, investors have a clear hunger for health stocks.

    After Republican Donald Trump’s presidential-election victory, the health-care sector trailed the pack as the wider market rallied. Heated campaign rhetoric from Trump and Democratic rival Hillary Clinton made investors wary that Washington would tamp down drug prices and take other steps to radically remake the health-care marketplace.

    Now, such fears are fading, and health stocks are making up for lost time. The Russell 2000 Healthcare Index has gained about 4.2 percent and the S&P Healthcare Index has gained 2.3 percent since Tuesday. The jump means the sector has erased the performance gap with the broader market, according to data compiled by Bloomberg.

    Reports in recent days have suggested that an anticipated executive order from Trump on drug prices will be industry-friendly. And the Senate’s version of legislation to repeal and replace the Affordable Care Act, made public this week, doesn’t go as far as some feared in making changes to current law, analysts said. That’s given some investors the green light.

    "I have enough clarity now to invest," said Jeff Jonas, a portfolio manager at Gabelli & Co., managing about $600 million in health-care assets. "What’s become clear is that we’re going to be sticking with something close to the status quo. The amount of change that the Senate or House bill was proposing is nothing compared to what we went through six or seven years ago when ACA was passed."

    Gabelli took advantage of a health selloff earlier this year, when Trump threatened to have the government negotiate drug costs, to buy shares of Shire Plc, Alexion Pharmaceuticals Inc. and Ligand Pharmaceuticals Inc., Jonas said. The firm’s Healthcare & Wellness fund, with $294 million in assets, had a total return of 6.2 percent in the first quarter, compared with 8.4 percent for the S&P 500 health index, according to the fund’s most recent quarterly report.

    Great Rotation

    Part of the jump is being driven by traders trying to stay ahead of a high-flying stock market — the S&P 500 index is up roughly 9 percent so far this year — by finding undervalued companies and sectors that may still have room to run, a strategy known as sector rotation.

    The recent health rally "smells more like a risk-on trade as the sector has been technically beaten down," said Benjamin Dunn, president of Alpha Theory LLC, which works with hedge funds overseeing about $6 billion. "It’s an obvious place to put some capital to work versus places like tech that have recently run.” Dunn said that so much money had been poured into tech stocks during the market’s runup that biotechnology and health care are natural areas to chase.

    Among the biggest beneficiaries of investors’ renewed interest in health care have been exchange-traded funds. Over the past three days, investors piled more than $700 million into the Nasdaq Biotechnology ETF, known as the IBB, the most since the aftermath of November’s election. Outstanding shares for the IBB have jumped about 8 percent in the past three days, the strongest three-day span since November.

    Despite the strength of recent days, the Nasdaq Biotechnology Index is still off 20 percent from its July 2015 peak.

    The ambiguity surrounding Congressional efforts to alter Obamacare served as a sort of "wet blanket” that has been removed and allowed the sector to take off, said Tony Scherrer, director of research and co-portfolio manager at Smead Capital Management, which manages about $2 billion. "The first move this week was related to what may or may not happen with price controls and yesterday’s health care announcement only fueled it from there."

    Leerink analyst Geoffrey Porges wrote in a note to clients that that he expects the biotech sector to climb another 15 percent on second-quarter earnings after its recent gains.

    Open for Business

    While Trump is yet to issue his drug-prices order and the Senate’s health legislation faces a tough road to passage, given opposition from key Republicans, some investors also point to signs that the Food and Drug Administration will give new drugs a smoother, faster path to market. The FDA has approved 23 drugs so far this year — more than in all of 2016.

    “What people forget is the FDA is open for business, and the industry is productive in its research and development efforts,” said Marshall Gordon, an investor with Clearbridge Investments. He said that managed care, medical technology and biotech all represent growth areas within health care.

    Gordon said the market has realized lawmakers aren’t likely to change the way drugs are priced in the U.S.

    “Health-care specialists have been onto this for a while, but generalists are finally getting to this — that they aren’t going to hurt drug pricing,” he said.

      Read more: http://www.bloomberg.com/news/articles/2017-06-23/health-stocks-surge-shrugging-off-uncertainty-in-washington


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      U.S. Stocks End Mixed, Bonds Gain as Oil Advances: Markets Wrap


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      U.S. stocks pared gains in late trading to end the day little changed as financial shares slumped with Treasury yields. Crude failed to hold its largest gains and settled below $43 as concerns mounted that the slump could spread.

      The S&P 500 Index traded in a narrow band, slipping in the final half hour to notch its third straight decline. The bank slump overshadowed a rally in health-care shares amid the Senate’s version of a reform bill for the industry. The 10-year Treasury yield slid below 2.15 percent. Crude halted a losing streak but concerns of a supply glut persisted, helping gold claw its way back from a one-month low.

      Read more: Wednesday Is Fast Becoming Oil’s Least Favorite Day of the Week

      Senate Republicans’ proposal to replace Obamacare would provide an additional $50 billion over four years to stabilize insurance exchanges, though four of the party’s members voiced opposition. Nasdaq’s biotech ETF pushed its four-day rally past 9 percent. Crude appeared to have found a bottom, only to pare its advance later in the day and hold near a 10-month low, raising concern the rout would spill into other parts of the market

      Thirty-four of the largest banks operating in the U.S. cleared a Federal Reserve stress test of their ability to withstand economic shocks. Also in focus are the newly-started negotiations on Britain’s split with the European Union. Prime Minister Theresa May, in the first EU summit since the election, will outline how the U.K. proposes to treat the bloc’s citizens after it leaves.

      Read our Markets Live blog here.

      Here are the main market moves:

      Stocks

      • The S&P 500 Index fell less than 0.1 percent to 2,434.50 at 4 p.m. in New York. It’s down 0.8 percent during its three-day slide. Health-care shares in the index jumped 1.1 percent.
      • The Nasdaq 100 Index dropped less than 0.1 percent after rising 1 percent Wednesday. It’s still 1.8 percent below its high on June 8.
      • The Europe Stoxx 600 ended higher by less than one point to halt a two-day decline..
      • MSCI’s emerging-market index advanced 0.3 percent.

      Commodities

      • West Texas oil rose 0.5 percent to settle at $42.74 a barrel, stabilizing after falling into a bear market earlier in the week. Investors remain focused on brimming supplies that work against OPEC-led efforts to reduce a glut.
      • Gold futures climbed 0.3 percent to end at $1,249.40 an ounce, extending gains after halting a five-day slide on Wednesday as crude’s slump this week stoked concern reflation will remain tepid.

      Currencies

      • The Bloomberg Dollar Spot Index dropped 0.2 percent, led by losses against the Canadian dollar, which bounced back on the heels of crude’s rally and surprisingly strong retail sales data.
      • The yen strengthened 0.1 percent to 111.247 per dollar after two days of gains. 
      • The euro gained 0.2 percent to $1.1152.

      Bonds

      • The yield on 10-year Treasuries fell two basis points to 2.14 percent.
      • Hedge funds and other large speculators this week kept plowing money into curve flatteners, or wagers that the yield spread between short- and long-term Treasuries will narrow. The trade has paid off handsomely.
      • Sears Canada Inc., the struggling offshoot of Sears Holdings Corp., filed for protection from creditors Thursday after running short on shoppers and cash.
      • Yields on European government bonds were mixed, with that of benchmark gilts in the U.K. falling three basis points and those in France little changed.

        Read more: http://www.bloomberg.com/news/articles/2017-06-21/oil-slide-extends-as-gold-rises-stocks-mixed-markets-wrap