The US transport sector and the biotech sector are two extremes of the US market
The US transport sector and the biotech sector are two extremes of the US market. The Dow Jones Transportation Average (the white line) tends to be more in tune with the US economy than the NASDAQ biotechnology index (the green line). The correction in US biotech prices has raised concerns that the markets as a whole may be faltering. Labour demand and business investment are the two noticeable weak points but, on the other side of the ledger, corporate profitability is strong. Biotech prices have been behaving much as they did around 2000, deviating from the underlying economic performance and making them far more vulnerable to a share price correction. At the close of last week, the most overextended part of the market was correcting. What happens to the transport index may be a far more important indicator of a change in market direction.
John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...
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