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T3's Take 3: Biotech Drags Down the Market Once Again


Today's financial recap and tomorrow's financial outlook.

Today at T3 Live

T3 Live cordially invites you to our first annual Finance Festival, scheduled for November 6-8 in sunny Miami, Florida.

Since we announced the event on July 8, we've added some very big names to the agenda, including:

-David Kotok, Founder and Chief Investment Officer of Cumberland Advisors
-David Rosenberg, Chief Economist of Gluskin Sheff
-Ivan Zinn, Chief Investment Officer of Atalaya Capital Management

Read about our expanded lineup here.

Biotech Drags Down US Markets

US markets followed their European counterparts as concerns about global growth bubbled up again.

And in a repeat of what we saw on Friday, the biotechnology sector, once the market leader, collapsed on no news. The NASDAQ Biotechnology Index ETF (IBB) dropped 6.3% as traders shed risky stocks, making the health care sector the hardest hit in the S&P 500.

Energy also took a beating sharp drop in oil and commodity prices.

The S&P 500 closed down 2.6% at 1881.77, leading traders to fear a retest of the August 24 low at 1867.

The sharp drop in equities pushed the VIX up 16.2% to 27.43.

The PCE price index, an inflation metric closely watched by the Fed, was in-line with expectations, showing no sign of nearing the Fed's 2% target. 

World Equity Markets

Asian equities were mixed today.

Volume was light as Hong Kong, Taiwan, and South Korean markets were closed for mid-autumn festivities.

Japan's Nikkei fell 1.3% ahead of industrial profits data and Bank of Japan's corporate sentiment survey, due out Wednesday. Nearly 1000 companies in the Topix entered their ex-dividend dates, when shares typically decline by the expected value of the dividend. Suzuki Motor company dropped 2% after it announced it will sell its 1.5% share in Volkswagen (VW) to Porsche. The Shanghai Composite finished up 0.3%, jumping into the green during the final hour of trading today, despite weak Chinese economic data.

Industrial profit data showed an 8.8% decline in August. While many investors weren't surprised, given that most recent data out of Asia has been disappointing, it did weigh on investor sentiment.

The German DAX dropped 2.1% from losses in automakers, while the French CAC tumbled 2.8%.

Volkswagen shares fell about 7.5% on news that 2.1 million vehicles in its Audi division were involved in the emissions scandal. Mining company, Glencore, saw a nearly 30% drop in its stock as investors worried about the affect of low commodity prices. Investors were also concerned about the high levels of debt the company's trading arm needs.

Alcoa Splits

The top aluminum maker in the US, Alcoa (AA), will be separating into two publicly traded companies.

The move will separate the company's manufacturing operations from its smelting and refining business, which has been struggling amid a recent boom in production from China.  Prices have dropped nearly 16% this year as producers in China attempt to boost exports.

Company CEO Klaus Kleinfeld stated "we've worked very hard on changing the setup of both of these businesses. All this has led to a structure of both firms to really be competitive and able to run on their own."

The tax-free transaction is expected to be completed in the second half of 2016.

Alcoa shares finished up 5.7 at $9.59, thanks to a late-day surge.

Tuesday's Financial Outlook

US economic news for tomorrow will include S&P Case Shiller home prices, and the Consumer Confidence Index.

Overseas economic data will include Spain & German CPI, British retail sales, European business & consumer surveys, Japanese industrial production, and New Zealand business confidence. 

Costco (COST) will release its earnings report after the close tomorrow.
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