The skittish stock market took another tumble — and plunging biotech stocks led the way lower.
The Dow slid 313 points and the S&P 500 lost 2.6% on Monday. The Nasdaq experienced steeper losses, shedding 3%. It was the Nasdaq’s worst one-day decline since August 24, the day the Dow took an unprecedented 1,000-point nosedive.
The biotech sector continues to get crushed. Long a favorite of investors, biotech stocks have stumbled amid concerns that political pressure will end steep drug price increases.
The iShares Nasdaq Biotechnology ETF plummeted 6.3% on Monday, its biggest one-day loss since 2011. The ETF has soared almost 600% since March of 2009. But in just the last six trading days, it’s fallen nearly 19% since Hillary Clinton tweeted her outrage about alleged “price gouging” by drug makers.
“Investors are in a more conservative mood right now. The higher the valuation of a sector, the more vulnerable it is,” said David Kelly, chief global strategist at JPMorgan Funds.
Valeant Pharmaceuticals plummeted nearly 17% after Congressional Democrats pushed to subpoena the company over recent price hikes on two heart drugs.
But it’s not just biotech in retreat mode. All 10 sectors and 490 stocks in the S&P 500 lost ground on Monday.
Fed frustration mounts
Deep uncertainty about the future has kept investors on edge. Many have no idea when the Federal Reserve will raise interest rates, a seminal event for the markets.
After the Fed decided earlier this month not to raise rates, the stock market reacted negatively. The Fed’s statements fanned fears the global outlook was darker than previously thought.
Now the Fed is sending the markets mixed signals on when a rate hike will happen.
Fed chief Janet Yellen and New York Fed President Bill Dudley reiterated since then that a rate hike is coming this year. However, Chicago Fed President Charles Evans, a voting member of the Fed, suggested the central bank should hold off until the middle of next year.
“While transparency is good, what the market really wanted is clarity. What we’re seeing instead is confusion,” said Kate Warne, investment strategist at Edward Jones.
Global growth jitters persist
The investing outlook is also being muddied by a slowdown in global economic growth, led by China.
China’s troubles have hurt prices for raw materials like crude oil, copper and iron ore. It’s a terrible time for countries and companies that rely on commodities for revenue.
Glencore is a prime example — shares of the mining giant plummeted nearly 30% on Monday as investors feared how it would service its huge debt load. One analyst even warned Glencore’s shares could become virtually worthless.
Glencore’s troubles are “reverberating throughout the rest of the markets today,” said Aknur Patel, chief investment officer at R-Squared Macro Management.
The energy sector was the worst performer on Monday, shedding another 5%. Companies like Chesapeake Energy and Range Resources lost 9% apiece.
Time to bargain hunt?
While it’s a scary time for people with money in the market, others who have been waiting on the sideline could be lured in by cheaper prices.
Concerns that stocks have gotten too expensive should be eased by the recent pullback, assuming corporate profits don’t fall off a cliff.
“Individual investors should pay no attention to this at all. If the economy is fine then this does constitute a buying opportunity. It’s a hard day to say that but it’s the truth,” said JPMorgan’s Kelly.