The skittish stock market is taking another tumble — and plunging biotech stocks are leading the way lower.
The Dow slid 300 points and the S&P 500 lost 2.5% on Monday. The Nasdaq experienced steeper losses, shedding nearly 3%. It’s on track for the worst one-day decline since August 24, the day the Dow took an unprecedented 1,000-point nosedive.
The biotech sector continues to get crushed. Long a favorite of investors, biotech stocks have stumbled amid concerns that political pressure will end steep drug price increases.
The iShares Nasdaq Biotechnology ETF plummeted 6% on Monday, on track for its biggest loss since 2011. The ETF has soared almost 600% since March of 2009.
“Investors are in a more conservative mood right now. The higher the valuation of a sector, the more vulnerable it is,” said David Kelly, chief global strategist at JPMorgan Funds.
Fed frustration mounts
Deep uncertainty about the future has kept investors wary. Global growth is slowing due to trouble in China, and investors have no idea when the Federal Reserve will raise interest rates, a seminal event in the stock markets.
After the Fed decided earlier this month not to raise rates, the stock market reacted negatively. The Fed’s statements fanned fears the global outlook was darker than previously thought.
The Fed has also sent the markets more mixed signals.
Fed chief Janet Yellen and New York Fed President Bill Dudley reiterated since then that a rate hike is coming this year. However, Chicago Fed President Charles Evans, a voting member of the Fed, suggested the central bank should hold off until the middle of next year.
“While transparency is good, what the market really wanted is clarity. What we’re seeing instead is confusion,” said Kate Warne, investment strategist at Edward Jones.