Biotech stocks recover from Trump line of fire

Biotechnology companies staged a comeback on Thursday afternoon after losses caused by Donald Trump’s warning to the pharmaceutical industry over drug pricing.

The Nasdaq Biotechnology Index fell more than 1 per cent in morning trading before recovering to trade 0.4 per cent higher on the day, outperforming the Nasdaq Composite, which fell 0.3 per cent.

The biotech index, which lost 3 per cent on Wednesday, is broadly seen as a proxy for pharmaceutical companies, of which the US is an important customer through its health insurance programmes.

Mr Trump had homed in on the sector during his press conference, declaring that he intended to “repeal and replace” the Affordable Care Act and that he would move swiftly to propose reforms.

Pharmaceutical companies were also next in line to face Mr Trump’s anger over jobs moving outside of the US — Ford Motor company recently abandoned plans to build a new production plant in Mexico.

“We have to get our drug industry back,” said Mr Trump, airing plans for a new border tax. “The other thing we have to do is create new bidding procedures for the drug industry, because they’re getting away with murder.”

Drugs companies Mylan and Pfizer lost ground in New York, falling 1.4 per cent and 0.7 per cent respectively. But some positive patches for the sector remained. Valeant rose 2 per cent and Merck notched up a 0.9 per cent gain, building on its 2.9 per cent advance on Wednesday.

Merck’s rise is tied to the company obtaining priority review for treatment of lung cancer involving its drug Keytruda, according to analysts.

The S&P healthcare sector gained 0.1 per cent, beating the broader S&P 500 benchmark index, which shrunk 0.2 per cent. Anthem, a health insurance company, helped to lift the sector with a 1.4 per cent rise. Rivals Cigna and Humana also gained 1.6 per cent and 0.9 per cent, respectively.

Financial stocks pulled the index down in a sign that the so-called “Trumpflation” trade — a bet that fiscal spending and tax cuts will lift US growth — is taking a pause.

The S&P 500 sector index dipped 0.7 per cent as the industry will face further scrutiny on Friday when Bank of America Merrill Lynch, Wells Fargo and JPMorgan report earnings.

Mr Trump has so far offered little detail on a number of key economic predictions that have helped lift interest rates and rally stock markets since the US presidential election.

“The ‘Trump slump’ that we warned of is finally coming at the markets full throttle,” said Chris Rupkey, chief financial economist at MUFG. “The dollar, bond yields and stocks all still in headlong retreat on the lack of specifics from Trump’s first press conference.

“It’s not current economic conditions, it’s all about the future for the stock market. Stocks can ride on a dream but unless the dream becomes a reality somewhere down the line, then stocks are going to retreat from those big dream-sized gains.”