Drugs Up, Jobs Down and Tech Dominates
Let's check the pharma rally, those ADP numbers, Palantir and the S&P's top 3 weighted stocks, Nvidia, Microsoft and Apple.
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I'd like to wish my friends marking Yom Kippur who might be reading or will at some point read this, an easy fast. As for the rest of us, whether this day is religiously significant to us or not, I am sure that we all have something to atone for. Now would be a good time to hit the deck and pop out a max set of push-ups. That said, on to the business of the day.
The Rally Continues...
The rally in drug stocks continues. On Wednesday, the S&P Health Care sector SPDR ETF (XLV) easily led the 11 sector SPDRs with a gain of 3.09%. That came on top of Tuesday's 2.41% run. Interesting. Year to date, this fund is in tenth place among those eleven funds, up just 5.67% for 2025. That's right. After Monday's closing bell, XLV was down 1.2% for the year.
Pharmaceutical and Biotech stocks rallied sharply for a second consecutive day, leading the sector in the wake of Pres. Trump's announcement of a direct-to-consumer prescription drug selling website. That would seem somewhat counterintuitive unless one considers the deal made between Pfizer (PFE) and the administration that will allow that firm to avoid potential tariffs in exchange for a reduction in drug pricing by up to 85% off inflated list prices and matching prices charged in other countries.
The outcome appears to be something of a relief for the industry, which was apparently expecting worse. Eli Lilly (LLY) is said to be openly negotiating with the Trump administration in an effort to make a deal similar to Pfizer's.
On Wednesday, AstraZeneca (AZN) gained 9.96%, Lilly ran 8.18%, and Merck (MRK) rallied 7.39%. Week to date, Pfizer is up 14.52%, AZN is up 14.37%, GSK (GSK) is up 14.2%, and Lilly is up 13.92%. No, to answer your next question, none of these stocks entered the week with especially large-sized short interest, this rally is organic.
At a Loss...
For jobs. With most of the federal government's bean counters out on furlough, the ADP Employment Report on private sector job creation for September took on increased importance. The data was not good. This unfortunate news helped push equities to new record highs on Wednesday. Novice traders may recall that we have tried to inform readers that when the Fed is known to be considering changes in monetary policy, that for stocks, good is bad and bad is good.
Well, for job creation, September was bad and upon revision, so was August. ADP reported that the U.S. economy shed 32,000 private sector jobs in September and that private sector job creation for August was revised to -3,000 from the +57,000 new positions that were initially reported. The September print of -32,000 was well below the +50,000 or so that had been the consensus view among professional economists ahead of the release.
Leisure and Hospitality was the industry that was hit the hardest in September, as that group lost 19,000 jobs all by itself. This is in sharp contrast to the post-pandemic years where this group regularly had been the nation's job creation generator. Education and Health care services appear to still be positive job creation offsets at least for now. Wages, according to the report, are up nicely year over year. Job changers experienced 6.6% wage growth in September, while job-stayers were up 4.5% from a year ago. Those numbers are down from 7.1% and up from 4.4% respectively from where they stood a month ago.
Marketplace
For the regular session on Wednesday, the S&P 500 gained 0.34% while the Nasdaq Composite rallied for 0.42%. Of all of the major and mid-major indexes that I often mention, it is worth mentioning that the Philly Semiconductors screamed 2.05% higher led by Micron Technology (MU) and Intel (INTC) . Those two stocks gained 8.86% and 7.12% respectively. It is also worth mentioning that the KBW Banks ended the day down 1.44%. Wells Fargo (WFC) led the large banks lower at -3.52%.
I don't consider these two indexes to even be mid-majors, but it has to be written here that on Wednesday, the Dow Jones U.S. Biotechnology Index gained 5.23% and the Dow Jones U.S. Pharmaceuticals Index ran 5.15%. Of the 11 S&P sector SPDR ETFs, four closed in the green, obviously led by Health Care and followed by Technology (XLK) , while five finished the day in the red. Two of these funds closed "unchanged" for the session. I do not think (I could be wrong; I am not trying to look this up) that I have seen as many as two of these funds end a day flat from the day prior since we moved from trading in fractions to decimals in early 2001.
As far as breadth is concerned, winners beat losers by a rough 7 to 5 at the NYSE and by about 4 to 3 at the Nasdaq on Wednesday. Advancing volume took a 59.1% share of composite Nasdaq-listed trade and a 56.6% share of composite NYSE-listed activity. Aggregate trade was slightly lower on a day over day basis across NYSE-listings as well as across the membership of the S&P 500. That said, aggregate trade was 12.5% higher across Nasdaq-listed securities.
Readers should be aware that Treasuries were strong on day one of the federal government's shutdown. By day's end, the U.S. Ten-Year Note paid just 4.1% (down 5 bps) while the U.S. Two-Year Note paid just 3.54% (-7 bps). It's early, but at zero-dark thirty on Thursday morning, Treasury markets have so far held those gains overnight. Gold continues to rally. Bitcoin continues to rally. The U.S. Dollar continues to weaken.
Concentration
According to a chart published by Charlie Bilello of Creative Planning, the biggest ten stocks in the S&P 500 have reached a weighting of 38.7% of the index, which is the highest concentration for the top 10 on record. In fact, the top three alone hold an aggregate weight of 21%. Those stocks would be Nvidia (NVDA) , Microsoft (MSFT) and Apple (AAPL) and their weightings currently stand at 7.65%, 6.69% and 6.67% respectively.
I hold both NVDA and MSFT, though they are weighted at number 13 and number 17 in my book. I think I'll be alright. My four heaviest weighted positions are up 235%, 68%, 252% and 502% over the past 12 months in that order. For those about to ask, those names are Palantir Technologies (PLTR) , CrowdStrike Holdings (CRWD) , SoFi Technologies (SOFI) and Rocket Lab (RKLB) . More on Palantir below. Let's hope I didn't just jinx myself.
News
- Fed Gov Lisa Cook will remain at her position until at least January following a Supreme Court decision to delay a ruling on her potential termination for cause by Pres. Trump.
- According to Semafor, Intel is reportedly engaged in discussions with Advanced Micro Devices (AMD) to add perhaps its greatest rival in the PC CPU business as a customer for its foundry business. How ironic is that? Almost as ironic as AMD doing business with Intel after Intel has announced an investment made by Nvidia and plans to work with Nvidia (AMD's rival in the GPU business) on co-developing chips for both PCs and the data center.
Early Morning Breakout?
We're still a few hours away from the opening bell, but Palantir Technologies (PLTR) is trading above the stock's $185 pivot point that had been created by the visible Cup with Handle pattern, which is a bullish set-up.
My target price remains $218, which is still the highest anywhere on Wall Street.
Economics
(All Times Eastern)
08:30 - Initial Jobless Claims (Weekly): Expecting 224K, Last 218K.
08:30 - Continuing Claims (Weekly): Last 1.926M.
10:00 -Factory Orders (Aug): Expecting 0.8% m/m, Last -1.3% m/m.
10:30 - Natural Gas Inventories (Weekly): Last +75B cf.
The Fed
(All Times Eastern)
10:30 - Speaker: Dallas Fed Pres. Lorie Logan.
Today's Earnings Highlights
(Consensus EPS Expectations)
No significant quarterly earnings scheduled.
At the time of publication, Guilfoyle was long MU, WFC, NVDA, MSFT, AMD, PLTR, CRWD, SOFI, RKLB equity.
