Biotech Stocks Shaken by Fed Warning

Today’s Financial Times (FT) reports that nearly $40bn was wiped from the biotech market’s value last week (a 6 per cent drop in the Nasdaq biotechnology index) following the Federal Reserve’s identification of biotech shares as a cause for concern. There was some recovery on Friday however when prices rebounded 3 per cent.

The US central bank has said biotech valuations in the sector appear to be stretched; the FT however points to analysts who argue that they “simply reflect the hoped-for higher growth rates, which can be astronomical”.

The FT also points out that investors “were pulling money out of the sector before the Fed issued its warning”. But the Nasdaq biotechnology index still remains 16 per cent above its low in April.