Drug Stock Index Reaches New High Amid Trade Truce Skepticism

(Bloomberg) -- The S&P 500 Pharmaceuticals Index rose as much as 1 percent to a record high, skirting a broad market sell-off as investors continued to shift into the high-momentum sector amid skepticism about the trade truce between the U.S. and China.

• Merck and Pfizer, which have been added to the closely watched $9.4b iShares Edge MSCI USA Momentum ETF in its latest rebalance, are among today’s top performers
• Mutual funds and hedge funds have also increased their exposure to health care into the fourth quarter, according to data from Goldman Sachs, with pharma accounting for the largest increase in allocations from mutual funds
  • The most "crowded" biopharma-longs for these funds include AMGN, BIIB, LLY and VRTX, Goldman analyst Asad Haider wrote in a note last week
• The momentum in pharmaceutical stocks has accelerated since mid-July as investors sought havens from the trade war with China and appetite for growth tech shares waned
• Biotechnology stocks, which are typically seen as a barometer for risk appetite, are rebounding from their worst monthly drop in October since early 2016; the Nasdaq Biotech index rose as much as 0.9% today
• The S&P 500 Health index remains the top-performing sector in the S&P 500 this year, up 15%

To contact the reporter on this story: Tatiana Darie in New York at tdarie1@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Richard Richtmyer

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