Biotech ETFs Pace Weekly Stock Decline on Earnings Misses

ETF Trends

Biotech exchange traded funds suffered the biggest losses this week on earnings misses by some of the sector’s largest names. Meanwhile, among the major stock indices, the S&P 500 fell 1.9% for the week in Friday afternoon trading, the Dow shed 2.1% and the Nasdaq Composite declined 1.3%.

Regeneron Pharmaceuticals (REGN), the largest holding in iShares Nasdaq Biotechnology Index Fund (IBB), was on track for a weekly decline of more than 6%. It was among the biotech companies that reported quarterly earnings this week.

Hedge fund Deerfield Management thinks the biotechnology sector might be in a bubble right now after a strong run, the Motley Fool reports. Although there are some nuances to be considered such as patent expiration and product pipeline, this is mostly a “testament to relative valuations in the biotechnology industry and how much investors are willing to bank on future earnings materializing.”

In commodity ETFs, natural gas funds suffered the biggest setback this week. Oil ETFs were also weak as crude futures tumbled below $86 a barrel. [Four ETFs for an Oil Rebound]

In stock ETFs, lackluster third-quarter earnings reports are unsettling investors. [Earnings Worries Hit Stock ETFs]

S&P estimates earnings of S&P 500 companies fell 3% in the third quarter from a year ago. That would be the first drop in corporate profits since the end of the recession, according to Fortune.

U.S.-based stock funds had their worst week since early September with ETFs accounting for most of the outflows. [ETF Outflows Speed Up on Market, Earnings Fears]

The top three unleveraged ETFs this week were volatility funds such as VelocityShares Long VIX Short Term (VIIX), iPath S&P 500 VIX Short Term Futures (VXX) and ProShares VIX Short Term Futures (VIXY) with gains of more than 5%.

The bottom three unleveraged ETFs this week were First Trust Natural Gas (FCG), First Trust Biotech (FBT) and iPath Crude Oil (OIL). They lost over 5%.

In next week’s economic data, look for reports on personal income and spending, home prices, consumer confidence, Chicago PMI, ISM manufacturing, construction spending and factory orders. The October nonfarm payrolls report crosses on Friday.

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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