The Australian market will start uncertainly this morning, thanks to the mixed finish on Wall Street which was hit by a further sell-off in drug stocks.
That sell-off more than offset a strengthening of the belief that the Fed would lift rates later this year after solid third estimate of June quarter GDP on Friday.
While the Dow rose, the Nasdaq was whacked again and the S&P 500 ended lower as a result.
Our market will start with a small loss, while the Aussie dollar regained the 70 US cent mark after weakening for most of Friday in the wake of Janet Yellen’s comments supporting a rate rise this year for the US.
The US market ended the week with a whimper, turning big opening gains into losses by the end of the session Friday.
A sharp sell-off in biotech and health-care stocks spread to broader markets.
The S&P 500 closed less than a point lower at 1,931.34 and booked a 1.4% weekly loss.
The Dow closed 113.35 points, or 0.7%, higher at 16,314.67 and declined 0.4% over the week.
The Nasdaq Composite ended the day down 47.98 points, or 1%, at 4,686.50 and posted a 2.9% weekly loss.
The big market mover was in the biotech index on Friday which extended this week’s drop to 13%, its biggest weekly fall in seven years.
That was after the controversy of the pricing of an old drug which had been bought by a smartypants former Hedge fund executive now running a start up drug company.
His boosting of the price of the drug saw US Democratic presidential candidate Hillary Clinton warn on Monday that she would announce a plan to stop “price gouging” for specialty drugs, sparking a drop in the sector for the rest of the week.
The S&P 500 health care index was down 2.7% on Friday, leading the decline in the S&P 500 while the S&P financial index was up 1.5%, thanks to Ms Yellen’s comments.
After Ms Yellen’s comments on the timing of the rate rise in her speech on Thursday, the surprise rise in June quarter GDP in the third official estimate was a surprise as economists had not expected any increase from the 3.7% annual rate in the second estimate a month ago.
Second quarter GDP was boosted to an annual rate of 3.9%, increasing the size of the rebound from the weather-influenced 0.6% rise in the March quarter.
The stronger rise was driven largely by an increase in spending by consumers. In fact consumer spending jumped 3.6%, up from a prior estimate of 3.1%.
US businesses also invested more in structures such as office buildings and plants than the government initially reported.
Investment on structures, for instance, rose 6.2%, double the earlier estimate. Outlays on equipment also rose slightly instead of falling in the second estimate. And spending for home construction climbed 9.3% instead of 7.8%.
This Friday night’s US jobs report will help the Fed decide on the rate rise timing.
The strength of the upgraded GDP numbers underlines Ms Yellen’s comments on Thursday, barring a disaster in China or emerging markets, there’s a rate rise coming, it would seem.
Stock markets in Europe rallied after Ms Yellen’s comments, with the Stoxx 600 benchmark index closing 2.8% higher on Friday.
Gains were seen across the eurozone, especially in Germany, France and Italy where markets jumped by between 2% and more than 3%.
And, after several changes in direction the Australian sharemarket closed lower on Friday, not far from the day’s trough.
The ASX200 lost 0.6% to 5042.1, after earlier in the session jumping as high as 5116.3. For the week, the ASX200 lost 2.5%.
But the early momentum didn’t hold, as investors sold off the big banks, which all ended down around 1.3%. Mining stocks rose, with Rio up 1.3% and BHP up 0.35%.
