Markets

Retail Leads Broad Stock Sell-Off; Will Biotechs Find Support?

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Key U.S. index funds were down Thursday as stocks sold off hard amid North Korea concerns.

[ibd-display-video id=2077867 width=50 float=left autostart=true]PowerShares QQQ Trust ( QQQ ) sank 1.2%, heading toward a potential test of support at its 50-day moving average line. SPDR S&P 500 ( SPY ) fell 0.7% and SPDR Dow Jones Industrial Average ( DIA ) lost 0.5%. DIA fell back below the 22,000 level.

The sell-off wasn't restricted to U.S. equities. IShares MSCI Emerging Markets ( EEM ) and iShares MSCI EAFE ( EFA ) tumbled 1.5% and 1%, respectively.

Retail led the downside among sector plays. SPDR S&P Retail (XRT) sold off more than 2% as department stores dropped after earnings reports : Dillard's (DDS) plunged 15%, while Kohl's (KSS) and Macy's (M) lost 8% apiece.

Banks, biotechs and chips were also among the biggest losers.

But gold rallied as investors sought a safe haven. VanEck Vectors Gold Miners (GDX) and VanEck Vectors Junior Gold Miners (GDXJ) rose a respective 1.7% and 1.2%. PowerShares DB Gold (DBO), iShares Gold Trust (IAU) and SPDR Gold Trust (GLD) were up about 1% each.

Will Biotechs Find Support?

Biotechs have been taking a rest after a recent run to their best levels in well over a year. ETFs that hold Celgene (CELG), Biogen (BIIB) and Gilead Sciences (GILD) and the like have contributed to that pause.

As such, several biotech ETFs have been pulling back to their 50-day moving averages , which could set up a fresh buy opportunity on a solid bounce off the line. Early Thursday, they were trading slightly below the line.

First up is iShares Nasdaq Biotechnology (IBB), with total net assets of $9.3 billion. The 16-year-old fund is heading toward a potential test of its 50-day line. It gained nearly 9% from a June 21 breakout to a July 25 intraday high.

IBB, which tracks the Nasdaq Biotechnology Index, counted Celgene, Biogen, Gilead Sciences and Amgen among its top holdings as of Aug. 8. Celgene and Amgen have beaten the broader market this year with respective gains of 17% and 19% through Wednesday.

[ibdchart symbol="IBB" type="daily" size="threequarter" position="leftchart" /]

The fund is a bit top heavy: The top five names account for around 40% of assets. Its portfolio contains 161 stocks with North America (primarily the U.S.) representing 92% and Europe 8%.

IBB has outpaced the S&P 500 with a year-to-date return of 18.6% vs. 11.9% through Aug. 8, according to Morningstar Inc. It lags the benchmark index for the past three years (7.9% vs. 10.9%), but has solidly outperformed the S&P 500 over the past five, 10 and 15 years. IBB has a 0.47% expense ratio.

SPDR S&P Biotech (XBI) bounced off its 50-day line last week, but could soon test support again. Shares rose as much as 13% from a June flat-base breakout to their July 25 high.

XBI, launched in January 2006, has attracted $3.5 billion in assets. The fund tracks the S&P Biotechnology Select Industry Index, a modified equal-weighted index comprising U.S. stocks.

[ibdchart symbol="XBI" type="daily" size="threequarter" position="leftchart" /]

Top holdings as of Aug. 8 included Exelixis (EXEL), Kite Pharma (KITE), Alexion Pharmaceuticals (ALXN) and Celgene. The top 10 accounted for about 24% of assets. Exelixis, the biggest position, made up 2.7%.

The ETF has rallied 31.5% YTD through Aug. 8 and its returns over the past three, five and 10 years have outpaced the S&P 500 by a wide margin. XBI has an expense ratio of 0.35%.

Wednesday's picks, Vanguard Mega Cap Value (MGV) and iShares Edge MSCI USA Value Factor (VLUE), continue to trade just below their respective buy points.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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