While the broad U.S. equities market strengthened Thursday, the biotechnology sector looked under the weather, with sector-related exchange traded funds slipping to 52-week lows.
On Thursday, the iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB) fell 3.6% and SPDR S&P Biotech ETF (NYSEArca: XBI) dropped 3.5%. Year-to-date, IBB declined 19.2% and XBI decreased 26.4%. Both biotech ETFs were trading at a 52-week low.
Meanwhile, investors who were wary of a biotech pullback capitalized on inverse or bearish ETF options to trade the fallout. For instance, the Direxion Daily S&P Biotech Bear Shares (NYSEArca: LABD) takes the -3x or -300% daily performance of the biotech sector, ProShares UltraPro Short NASDAQ Biotechnology (NasdaqGM: ZBIO) tracks the -3x or -300% daily performance of the Nasdaq Biotechnology Index and ProShares Ultrashort Nasdaq Biotechnology (NasdaqGM: BIS) tracks the -2x or -200% daily performance of the biotech space. On Thursday, LABD gained 9.4%, ZBIO increased 10.8% and BIS rose 6.4%.
Paul Yook, portfolio manager at BioShares Funds, attributed the drop in the Nasdaq Biotech sector to disappointing earnings results, reports Evelyn Cheng for CNBC.
“Generally, companies were pretty conservative with their guidance,” Yook told CNBC. “It’s just been obviously the worst beginning to the year for biotech and investors are really fleeing and staying on the sidelines until they see some stabilization (in stock prices).”