The FOMC meeting and key legislation have the potential to change …
The two-day FOMC meeting begins today. Under Armor, Conoco Phillips and Pfizer publish their results. Health stocks have underperformed in the face of the pandemic this year. Government policy can affect health care stocks. Biotechnology underperformed overall, but Moderna outperformed.
Photo by Getty Images
Key points to remember
FOMC meeting starts today
Government decisions affect health care
The biotech industry offers investors both benefits and potential risks
The market this morning isn’t moving much, but today’s lukewarm start comes just after yesterday’s record closes on the Dow Jones, S&P 500 and Nasdaq 100. It’s unclear whether the good start of November is good. will continue in this historically strong context. – performing month, but if it does, that will be the result of how it behaves in the face of earnings results, Fed policy, economic reports and all the other news we are facing.
For today at least, the name of the game is payouts. Under protection (UA) exceeded expectations in terms of net income and also raised its outlook for the full year. While the total number of sales was not as impressive as some would have liked, it seems they more than made up for it with their brick and mortar sales.
Pfizer (PFE) also published results. The pharmaceutical giant has done well and the market is rewarding its numbers in this morning’s pre-market trading. They reported adjusted earnings of $ 1.34 per share for the third quarter of the fiscal year, beating analysts’ consensus estimate of $ 1.09 per share. This is also a big increase from the $ 0.59 they reported last year. Income also exceeded expectations.
From the Pont de Nemours (DD) also saw a decline in earnings ($ 1.15 real vs. $ 1.11 est.), But reduced its outlook. The company is a victim of the “supply chain drain” that we have seen so often in recent times. Conoco phillips (COP) also beat estimates, making a profit of $ 1.77 after losing $ 0.31 a year ago. The company benefited from the rise in oil prices; however, the action is virtually unchanged in pre-market trading.
In unpaid news, You’re here (TSLA) is down about 4% in pre-market trading after Elon Musk tweeted that the high-profile deal with Hertz Global has yet to be signed.
The coming week
The market will focus much of this week on a few key events. First, the FOMC begins its two-day meeting today, which will culminate in a statement and perhaps further clarification regarding both the cutbacks on bond purchases and the Fed’s thoughts on the inflation.
Other important news items that are likely to influence the market to look for in the coming days come in the form of laws. After weeks of wrestling with the details, the bipartisan infrastructure bill and $ 1.75 trillion reconciliation package could be voted on later this week.
And, of course, there will be more income. The near-daily earnings parade has had an impact on the markets over the past month, but the earnings season is starting to end. So far, 23 of the 30 companies in the Dow Jones have reported profits in October. Still, November will see top names like Disney (DIS), Home Depot (HD), and Walmart (WMT).
Focus on health care actions
A few health care actions are the focus of attention today. First, as mentioned above, Pfizer, a company at the forefront since the start of the pandemic, released its results this morning.
After the market closes, Amgen (AMGN) is about to break free. Amgen, unlike Pfizer, is a company that is not currently involved in manufacturing COVID-19 drugs, but is a large biotech company (market cap of $ 120 billion), an industry group that has played an increasingly important role in health care. sector.
Despite the high visibility of healthcare and healthcare stocks this year, the sector has not kept up with the S&P 500 (SPX). The sector is up 18% this year, compared to 24% for the SPX. It has also underperformed since the start of the pandemic. This shows that news related to a specific industry or company does not always translate into a great stock market performance. Of course, some individual stocks have benefited greatly from the pandemic, Moderna (MRNA) being one of them. We’ll see how that translates into its results, as the company reported on Thursday.
Covid Optimism: There is good news on the COVID-19 front. According to data from Johns Hopkins University, cases have declined by about 60% from the peak of Delta variant cases in mid-September. Still, there are fears that infection rates may rebound as winter approaches. I don’t know the future course of the pandemic, but changes in hospitalization rates, vaccination rates and the government’s response to the pandemic can certainly affect the economy, financial markets and, of course, the health care sector.
In the hands of the government: Speaking of government action, according to The Wall Street Journal, lawmakers are still at odds over whether a deal can be reached that could allow Medicare to negotiate with drug companies over drug prices, even though President Biden has decided not to include this provision in the last version. most recent of the social spending and climate package. . This is an example of the type of legislation that can affect the healthcare industry, especially pharmaceutical companies. The S&P 500 pharmaceutical industry is up more than 14% year-to-date, slightly underperforming the healthcare industry as a whole. Lately, however, pharmaceuticals have gotten stronger, up about 6% from the October 13 low.
New frontiers: Many investors interested in the healthcare industry see the biotech industry as the ‘wild west’. It has a well-deserved reputation for volatility, but also enthusiasm associated with innovative technology and, in our pandemic-stricken world, with real-world applications that have come to the fore. You don’t need to understand the intricacies of mRNA technology to see its impact.
Biotech investors should be careful, however. One of the reasons for the aforementioned reputation in the biotech industry is the difficulty in bringing its products to market. According to an article I recently read on forbes.com, less than 10% of products that have entered clinical trials will ever be approved. These types of random success rates translate into increased risk in exchange for increased potential reward in the market.
Despite all of biotech’s promises, however, the industry has disappointed this year, up just 5.6% year-to-date. Could this industry change direction and outperform in 2022? The answer is ‘yes’, but that will depend in part on the strength of earnings from companies like Moderna and BioNTech (BNTX) which produced Covid-19 vaccines, but also on other large biotechnology companies such as Abbvie (ABBV), Gilead Sciences (BROWN), Regeneron Pharmaceuticals (REGN), and Biogen (BIIB).
not a word
Useful educational content and programming
Discover all our upcoming Webcasts or watch one of our hundreds of archived videos, covering everything from market commentary to the basics of portfolio planning to trading strategies for active investors. You can also deepen your investment know-how with our free online offer immersive courses. Whatever your level of experience, there is something for everyone.
Are you looking to stay on top of the markets? Check TD Ameritrade Network, live programming that brings you market news and helps you hone your trading knowledge. And for the hottest events of the day, delivered straight to your inbox, you can now subscribe to Market Minute’s daily newsletter. here.
The TD Ameritrade Network is brought to you by TD Ameritrade Media Productions Company. TD Ameritrade Media Productions Company and TD Ameritrade, Inc. are separate but affiliated subsidiaries of TD Ameritrade Holding Corporation. TD Ameritrade Holding Corporation is a wholly owned subsidiary of The Charles Schwab Corporation.