Health-Care Stocks Slide as Clinton’s Lead Widens

  • Six of 10 worst-performing S&P 500 stocks are in health-care
  • Drugmakers lag amid speculation of 2016 Democratic sweep

Are health-care stocks coming down with something?

They were the only group in the S&P 500 Index posting losses in 2016 through last Friday, and are on pace for the first yearly decline since the bull market began in 2009. Among the 10 biggest single-stock declines in the benchmark this year, six are health-care companies. Drug, insurance and hospital stocks in the gauge slipped 0.2 percent at 4 p.m. in New York, while the full index fell 0.3 percent to 2,126.50, a one-month low.

The weakness is a departure from the past five years, when health-care’s 128 percent advance through 2015 ranked ahead of any other group. Now they’re down nearly 4 percent in 2016 as investors assess how the industry will fare should Hillary Clinton be elected president. The group posted a 3.3 percent decline last week, the biggest five-day loss since February.

“You have a perfect storm -- you obviously have the headline risk associated with the election,” Craig Sterling, head of U.S. equity research at Boston-based Pioneer Investment Management, said by phone. “There’s a much brighter light on the whole system. Whether this is temporal or not, it’s hard to know. If Hillary Clinton gets elected, it seems to be like there will be continued interest in it.”

Drugmakers have become political targets during the election season. Valeant Pharmaceuticals International Inc., Mylan NV, Turing Pharmaceuticals LLC and others have been the focus of congressional hearings, and Democratic presidential nominee Clinton has called out specific companies for price increases on old drugs. Last week, a tweet by Senator Bernie Sanders, where he cited Ariad Pharmaceuticals Inc. “greed” for raising the price of a cancer drug, sent the company’s shares down as much as 15 percent.

That concern is mounting as Clinton’s polling lead over Donald Trump widens and amid the possibility of Democrat control in Congress. At the same time, there’s been an overall shift in 2016 away from bull-market favorites like biotechnology and consumer-discretionary shares and into stocks with sturdier defensive credentials.

“There’s biotech, there’s managed-care and there’s hospitals, and they all have their different issues right now,” Dan Clifton, head of policy research at Strategas Research Partners in Washington, D.C., said by phone. “Pharma and biotech probably have more at stake in this election than any industry.”

U.S. stocks slipped Monday, with energy producers falling as crude oil dropped below $50 a barrel and retailers declined, led by Amazon.com Inc.’s third-straight slide. Lenders retreated even as Bank of America Corp.’s quarterly results exceeded estimates. Investors also weighed remarks from Federal Reserve Vice Chairman Stanley Fischer, who sees limits to how far the central bank can pursue a strategy to push unemployment ever lower.

The Dow Jones Industrial Average lost 51.98 points, or 0.3 percent, to 18,086.40. The Nasdaq Composite Index also fell 0.3 percent, while the CBOE Volatility Index rose 0.6 percent. About 5.2 billion shares traded hands on U.S. exchanges, 20 percent below the three-month average.

Netflix Inc. surged 19 percent after regular trading hours, as it reported adding more subscribers than estimated in the third quarter. International Business Machines Corp. sank 2.3 percent in late trading as of 4:32 p.m., after reaffirming its full-year view while its operating earnings topped analysts’ forecasts.

“My theme for the next couple of weeks is focus on earnings, but keep one eye on the dollar and interest rates,” said Mark Kepner, managing director and equity trader at Themis Trading LLC in Chatham, New Jersey. “The dollar keeps strengthening and that could have some effect on earnings.”

Stocks alternated between daily gains and losses for a seventh session, as sentiment swings on everything from central-bank policy to the U.S. election and perceptions on the economy’s strength. Bank earnings also remain in focus, with Goldman Sachs Group Inc. and Morgan Stanley due to report this week. More than 80 members of the S&P 500 release results this week.

Investors are also seeking clues from data and Fed comments on the trajectory of monetary policy. A report today showed output at U.S. manufacturers rose for the third time in four months. Traders have boosted bets for a December rate hike to 66 percent, from even odds on Sept. 27, and they’re pricing in a 17 percent chance of a move when officials meet early next month, before the Nov. 8 presidential election.

Fed Bank of Boston President Eric Rosengren said during an interview Saturday that the central bank is already running the economy hot enough to overshoot his estimate for the lowest sustainable level of unemployment and to reach its goal for 2 percent inflation. His comments followed a speech Friday in which Chair Janet Yellen said there are “plausible ways” that running hot for a while could repair some damage caused to growth during the recession.

The S&P 500 is on track for an October drop, a month that has yielded gains in five of the past six years. The benchmark is down 1.9 percent for the period so far after capping the first back-to-back weekly declines since August. It closed Monday 2.9 percent below a record last reached two months ago.

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