U.S. equities and stock exchange traded funds slightly weakened Wednesday as the ongoing rout in energy more than offset a jump in the healthcare sector.
The S&P 500 Index, along with related funds including the SPDR S&P 500 ETF (NYSEArca: SPY), iShares Core S&P 500 ETF (NYSEArca: IVV) and Vanguard 500 Index (NYSEArca: VOO), were 0.1% lower Tuesday.
Dragging on U.S. markets, energy company stocks in the S&P 500 declined 1.7% Tuesday as West Texas Intermediate crude oil futures slipped 3.0% to $42.2 per barrel.
Crude oil prices have fallen over 20% into bear market territory as a global supply glut continues to depress prices, despite efforts from the Organization of Petroleum Exporting Countries to cut output. Oil prices are on pace for their largest slide in the first half of any year since 1997, reports Sruthi Shankar for Reuters.
“I think there is a bifurcation between short and long term. Clearly, to this point the Goldilocks scenario and earnings have pushed stock prices higher but oil has perhaps tempered some sentiment near-term,” Terry Sandven, chief equity strategist at U.S. Bank Wealth Management, told Reuters. “If oil falls below $40, one would see pressure on overall earnings, not just the energy sector.”
On the other hand, healthcare companies in the S&P 500 continued their forward march, gaining 1.0% Wednesday, with the biotechnology sub-sector taking charge.
“To boil it down, it comes down to valuation and momentum,” Mike Bailey, director of research at FBB Capital Partners, told CNBC. “I think a lot of investors are dusting off the old biotech handbook and looking at these names once again.”
Biotech was also strengthening on signs that the Trump administration softened on its drug-pricing stance and as breakthroughs, like Clovis Oncology’s cancer treatment, renewed investment interest, Bloomberg reports.
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