While markets were mostly mixed to slightly stronger last week, the US Nasdaq market and its plethora of tech stocks fell sharply, especially biotechs.
It’s signally something might be wrong in this vibrant, at times, frothy sector of the world’s biggest tech market.
US shares fell by between 0.1% to 2.8%; shares gained 2.2% in Europe, 3.3% in Japan and were up in the rest of Asia, while the Australian market added half a per cent after looking weak for most of the five days of trading.
On Friday, the Dow rose 58.83 points or 0.36%, to end at 16,323.06.
The S&P 500 added 8.58 points or 0.46%, to finish at 1,857.62 and the Nasdaq Composite added 4.526 points or 0.11%, to close at 4,155.759.
For the week, the Dow rose 0.1%, the S&P 500 was off 0.5%, but the Nasdaq was down a very nasty 2.8%.
In fact it was the Nasdaq Composite’s worst week in 17 months, after a week-long sell-off in biotechs dragged the index lower.
That was the worst weekly performance since October 2012.
The Nasdaq Biotechnology index fell 2.8% last week as well.
One time high-flyers, Biogen Idec Inc. and Gilead Sciences, were among the top five losers on the S&P 500 on Friday, falling 5% and 4.9% respectively.
The biotech sector index fell 7% for the week.
Nasdaq Biotechnology Index – Watch Nasdaq and its biotechs, their weakness could be infectious
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With just one trading day left in March today, the index was down about 13% for the month at Friday’s close (the sector is now in a correction phase which is a fall of 10% or more from its latest peak).
The index peaked in late February and since then it’s been all downhill as the feeling the sector is overvalued and ‘frothy’ has taken hold of sentiment.
The week’s losses happened as investors took profits in some of the market’s biggest outperformers, mostly in the Internet and biotech space.
Some analysts say the sell-off in "momentum" stocks has yet to run its course, though this could benefit more value-oriented names. A move to such companies helped limit the Dow’s weekly decline.
Outside of the biotechs, Netflix, one of the more prominent ‘momentum’ tech names, continued its downward trend, slipping 1.5% to $US358.87.
Netflix shares have dropped for 16 of the last 18 sessions, losing about a fifth of its value over that period.
The big danger is that the longer these falls goes on, then it has the potential to unsettle the wider market.
Bank of America/Merrill Lynch released figures late last week showing investors pulled $US900 million out of US biotech-related investment funds a week earlier.
If that’s repeated in the next few weeks, the sell-off will intensify.
Elsewhere in the markets, most major European markets climbed over the week with indexes up in 15 of the 18 western-European markets.
The Stoxx Europe 600 Index rose 1.8% last week, trimming this month’s loss to 1.3%. The Stoxx 600 is now up 1.7% this year.
Germany’s DAX gained 2.6%, the UK’s FTSE 100 rose 0.9% and France’s CAC 40 closed 1.8% higher.
And in Asia, the MSCI Asia Pacific Index rose 0.7% on Friday, to take the gain in the past week to 3.2%.
But the index is heading for a monthly fall of 0.6% with only today’s trading to go.
Chinese shares in Hong Kong surged 6.1% last week on continuing reports of stimulus spending measures from the government.
That was the biggest gain for the sector in five months.
Japan’s Topix index climbed 3.5% on the week, the best such rally in four months.
In Australia, the ASX 200 Index rose 28.8 points, or 0.5% last week to 5366.9, while the All Ordinaries Index added 0.4% to 4376.8.
On Friday the S&P/ASX 200 Index added 16.8 points or 0.3%, while the All Ords rose 17 points or 0.3%.
