Biotech, energy shares jolt market
NEW YORK — Stocks broke a two-day losing streak Wednesday as investors bought up drugmakers and other health care companies. Energy companies also jumped as the price of oil surged.
Biotech drug companies, which have been mired in a long slide, made their biggest gains in almost five years. That came after Pfizer, one of the largest pharmaceutical companies in the world, gave up on a plan to buy Botox maker Allergan for $160 billion and investors wondered if it will look elsewhere.
The gains were only enough to wipe out most of the market's losses from a day earlier. Stocks wavered in recent weeks as investors wait for quarterly earnings to start pouring in, and many are bracing for another shaky quarter.
Jack Ablin, chief investment officer of BMO Private Bank, said it's going to be another weak earnings period, and the only way stocks will trade much higher is if companies are able to give optimistic projections for the rest of the year.
“Without an improvement in earnings or a projection of earnings growth, our outlook is kind of tapped out,” he said.
The Dow Jones industrial average gained 112.73 points, or 0.6 percent, to 17,716.05. The Standard & Poor's 500 index rose 21.49 points, or 1.1 percent, to 2,066.66. The Nasdaq composite index picked up 76.78 points, or 1.6 percent, to 4,920.72.
Biotechnology companies climbed on news of the canceled Pfizer-Allergan deal. Celgene, which makes treatments for cancer, gained $6.10, or 6 percent, to $108.22. Vertex Pharmaceuticals rose $7.15, or 8.5 percent, to $91.31.
Biotech stocks are facing pressure from legislators over the price of their drugs, and investors fear that their ability to raise prices will be impeded.
Energy companies gained ground as benchmark U.S. crude rose. Chevron picked up $2.17, or 2.3 percent, to $94.84, and Exxon Mobil added $1.10, or 1.3 percent, to $83.31. Hess rose $2.74, or 5.3 percent, to $54.
While the pace of company earnings will climb next week, a few companies made big moves Wednesday after they disclosed their results. Constellation Brands, the owner of Corona, Negra Modelo and Pacifico beers, reported solid quarterly results and raised its profit forecasts for the year. Its stock rose $8.98, or 5.9 percent, to $160.34.
Electronic payment processing company Global Payments gained $5.71, or 8.8 percent, to $70.86 after it posted strong quarterly results.
Lighting maker Cree said its sales will fall far short of expectations because of new product delays and software problems. The company said it may take a loss in the third quarter. Its stock lost $4.24, or 14.6 percent, to $24.81.
Ablin of BMO Private Bank said he thinks companies with a long history of maintaining or raising their dividends will do the best in the weeks and months to come. Telecommunications companies pay some of the biggest dividends on the market, and they slumped Wednesday as AT&T and Verizon prepared to pay out billions of dollars in dividends.
Harley-Davidson took the biggest loss on the S&P 500, as it gave up $3.50, or 7 percent, to $46.34. Analyst John Tomlinson of ITG Investment Research said he thinks the motorcycle company lost market share over the first three months of this year, and said he thinks its retail sales in the United States will drop in the first quarter.