 "Dynamic Capital")
US stocks saw mixed results Thursday as a combination of the uncertainty surrounding the healthcare debate weighed on overall performance of the sector, and a downgrade of Biogen by Morgan Stanley and Leerink sent the stock tanking 5.1%. Several different sectors dropped into the red throughout the day, with healthcare leading the ray, touching 1% in the red at different times. Financial stocks saw the largest increases as better than expected data from the housing sector in February showed mortgage sales going well, and a dip in weekly unemployment numbers displaying the strength of the overall economy being another strong positive indicator. Additionally, the Federal Reserve raising interest rates yesterday by 0.25% (bringing it to 1% total) also provided encouraging news for the financial sector as lending becomes more profitable.
Yesterday, Yellen (Chairman of the Federal Reserve) doubled down on her intent to stick to two more rate hikes this year, and three next year, after some investors suspected they would speed up the pace because of labor and economic conditions. Many analysts suspect part of the reason for the downturn in overall averages is people clearing out profits after betting on the outcome of the federal reserve announcement yesterday. Shares of Tesla made a bounce back after a turbulent few weeks as it broke news that it would be raising an additional $1.15 billion as the company prepares for the launch of its new vehicle, the Model 3 sedan.
In addition to the downgrade of Biogen, the proposal being made by Republicans in the federal government are signaling higher regulatory costs for the sector, which may result in lower profit margins. News surrounding the bill also surfaced that the federal government may intends to cut federal funding for medical research, which could hinder innovation in the medical field, or place a higher cost on the private sector to cover that (further cutting into profits). The proposal being put forth, if passed, would result in a 20 percent cut of federal dollars to the National Institutes of Health, with proponents of the bill citing that private insurance companies should be paying a larger share of the cost since they profit off the information provided by the Institute.
Relatively warm weather in February had a positive impact on the home-building sector as snow usually prevents them from operating normally up north that time of year, but there has been less than usual recently. Construction of single family homes actually jumped to a 9.5 year high, giving investors positive reassurance in the overall economy despite a slight slowdown in some economic data about last month. Combined with a tightening labor market, these are a few reasons why many investors are still bullish about overall prospects of the economy.