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Biotech Weakness Makes Indices Sick


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

Asian stock indices continued their rally last night despite a continued slowdown of manufacturing growth in China. The preliminary manufacturing index for March declined to 48.1 from 48.5 last month, which was below expectations of 48.7. Many investors had been looking for a rebound in activity now that the Lunar New Year holiday has passed. Nonetheless, the Shanghai Composite (SHA:0001) rose 0.91% in today's trading. The Chinese renminbi showed its largest single-day gain in the past three years thanks to comments from the Chinese Ministry of Finance that indicated there was not much potential for further depreciation in the currency.

Despite overnight strength, US equities largely lost ground today. Under pressure in particular were biotech and pharmaceutical stocks such as Gilead Sciences (NASDAQ:GILD), Pfizer (NYSE:PFE), and Bristol-Myers (NYSE:BMY). The biotech component of the NASDAQ-100 (ETF: IBB) declined by 3.03% today, leading a broader 1.18% decline in the index. The small-cap Russell 2000 (INDEXRUSSELL:RUT) underperformed today, losing 1.30% for the session. Even though many investors have turned bearish on the utilities sector due to the threat of higher interest rates, it outperformed today along with telecom-sector stocks.

A preliminary national gauge of manufacturing growth in the US showed a surprising decline to 55.5 from 57.1 last month, significantly below the 56.5 figure that had been expected for that index.

Tomorrow's Financial Outlook

Tomorrow morning's economic data reports will be centered around housing data. Early in the morning, the January S&P/Case Shiller 20-city home price index will be released with economists expecting a 13.34% gain from a year ago, little changed from the annual growth rate in the month prior. Also scheduled to be released are February new home sales and the Conference Board's index of March consumer confidence. New home sales, which make up about 10% of the total housing market, are expected to decline to an annual rate of 445,000 from 468,000 in January.

The overseas calendar remains light with only the German IFO survey of professional investors' feelings on the current economic situation and expectations, and the UK's February consumer price index due for release.

Walgreens (NYSE:WAG), PVH Corp (NYSE:PVH), and Carnival (NYSE:CCL) are scheduled to report earnings tomorrow.

Twitter: @Minyanville

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