Biotech Sector Weak Headed Into Year's End

Biotech investors can’t seem to get any relief from the selling pressure that has plagued the sector throughout 2016. Heading into the last few trading days of the year, biotech stocks appear to be closing 2016 on a low note.

Biotech stocks are having another tough day Thursday. In the past five trading sessions, the iShares NASDAQ Biotechnology Index (ETF) IBB is down 2.0 percent and the SPDR S&P Biotech (ETF) XBI is down 3.6 percent.

The move has been even more exaggerated in levered biotech ETFs. The Direxion Daily S&P Biotech Bull 3X Shares LABU is down 10.4 percent, while the Direxion Daily S&P Biotech Bear 3X Shares LABD is up 10.6 percent.

Run-Up To The Election, Then A Slide

Biotech stocks initially got a big boost when Donald Trump prevailed on Election Day. However, in a December interview with Time, Trump definitively said, “I’m going to bring down drug prices.” That statement rattled biotech stocks, which have since failed to recover.

Rising interest rates may also be weighing on the sector as well.

However, biotech weakness in the closing days of the year may also be driven by tax loss selling. With the S&P 500 up more than 10 percent in 2016, many traders may be looking to offset capital gains by selling some of their worst-performing stocks for tax purposes.

Year-to-date, the IBB ETF is down 21.1 percent.