Biotechnology Stocks Leading Wall Street in 2017

The US biotechnology industry has kicked off 2017 in fine fashion, pushing the Nasdaq Composite to four consecutive record closes at a time when the broader market is struggling to keep up momentum.

The technology-heavy Nasdaq Composite Index rose 0.4% to 5,551.82 on Tuesday. The benchmark gauge has yet to decline in 2017, rising in each of the past six sessions and setting new records in the last four. The last time the Nasdaq recorded four consecutive record highs was 1999.

The Nasdaq biotechnology index, an industry benchmark for biotech and pharmaceutical stocks, is up 8% this year. By comparison, the S&P 500 Index has gained just 1.3% over the same period.

With the Donald Trump rally approaching a near-term top, biotechnology is still heating up. This is a stark reversal to 2016, when biotechs were among Wall Street’s worst performers.

According to analysts, the uptrend is driven largely by the “January effect,” where investors put money back into equities that had previously sold off for tax purposes. The Nasdaq biotechnology index plunged nearly 22% in 2016, while the S&P 500 rallied 9.5%.

biotech

Biotechnology stocks listed on the S&P 500 have declined 2.4% year-over-year. By comparison, healthcare has added 4.7% over the same period. The only health component to perform worse than biotechnology was health technology, which sold off 18.3% year-over-year.

The outlook on health stocks dimmed last year as both US presidential candidates vowed to tackle rising drug costs. Last month, President-elect Donald Trade made himself an opponent of high drug prices by vowing to bring costs down. Biotech declined sharply as a result.

Trump’s election rescued US stocks from mediocrity last year, with all of Wall Street’s benchmarks reaching multiple highs. Financials, energy and materials stocks were among the biggest gainers, as sectors tied to health struggled to enjoy the post-election euphoria. The tables appear to have turned, at least momentarily, at the start of 2017.

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Sam Bourgi is a financial market analyst for economiccalendar.com. He has more than six years of progressive experience in economic and financial analysis, research consulting and sectoral analysis. As a published author in government, peer-reviewed, online and industry sources, he has developed a fundamental approach to the financial markets with a broad focus on stock indices, commodities and the technology sector. He earned his Bachelor’s Degree from the University of Windsor and Master’s degree from McMaster University.