NEW YORK, June 21 (Reuters) - As the U.S. Senate plans to unveil its bill to alter the healthcare system, stocks in the sector have been on a roll.
Led by biotechnology shares, the S&P 500 healthcare sector has topped all other major groups this month and led the way again on Wednesday. Tech’s recent pullback may be benefiting healthcare shares as investors rotate to different sectors.
Republican efforts to dismantle the Affordable Care Act, known as Obamacare, has created uncertainty this year for investors in the sector, but analysts doubt the Senate’s proposal, expected on Thursday, will significantly throw off the overall group’s momentum.
Senate Republicans have been working for weeks behind closed doors on legislation.
“Just getting to the end of the Senate process, whichever way it goes, is positive,” said Jeff Jonas, a portfolio manager with Gabelli Funds, adding that it was important “to get some level of certainty out there.”
For the year, the S&P 500 healthcare sector has climbed more than 15 percent, topping the 9-percent increase for the overall S&P 500 and trailing only technology’s roughly 19-percent gain among the major sectors.
Biotech fueled healthcare’s recent gains, with the Nasdaq Biotechnology index up 8 percent already this week.
The shares may be getting a boost from news reports suggesting Trump administration actions to rein in drug prices may not be overly onerous on the industry.
“What he’s proposing is a little bit less punitive than feared... That probably is a meaningful catalyst of late,” said David Katz, chief investment officer at Matrix Asset Advisors.
Impressive data on cancer drugs such as one from Clovis Oncology along with positive developments for larger players such as Alexion also may be helping the sector.
“Investors were caught a bit off-sides, in that they weren’t invested enough in the sector,” said Les Funtleyder, healthcare portfolio manager at E Squared Asset Management. “Now they are playing catch up a little bit towards the end of the quarter.”
Healthcare struggled last year - falling 4.4 percent against a 9.5 percent rise for the broader market - so the sector may have been due to bounce back. The Nasdaq biotech index tumbled 21.7 percent in 2016 and remains well below 2015 highs.
Political uncertainty clouded healthcare last year. After his election, President Donald Trump took aim at high drug prices, spooking investors in the sector.
“This year a lot of those fears are at least easing,” Katz said.
First-quarter results for the sector also shored up confidence. Eighty-four percent of healthcare companies topped analysts’ first-quarter earnings expectations versus 76 percent for the S&P 500 overall, according to Thomson Reuters I/B/E/S. (Reporting by Lewis Krauskopf; Editing by Nick Zieminski)