From Wolf Richter, at wolfstreet.com:
It was the kind of day that shouldn’t have happened. Somebody dropped the ball at CNBC, or something.
Thursday evening, after three morose days in US stock markets, Amazon came out and said it made a profit! OK, a teeny-weeny profit of $92 million, a barely perceptible 0.4% of sales, a rounding error for other thriving companies’ with $23 billion at the top line. But for Amazon, the mere fact that there wasn’t a minus-sign in front of it, for once, was huge.
Its shares soared 22% after hours. The company’s valuation jumped by $40 billion. CNBC exploded with excitement. And Friday should have been a huge day for stocks.
But oh my!
From the first minute on, Amazon’s shares lost steam, drifted lower throughout the day and gave up half of their afterhours gain. The S&P 500 and the NASDAQ lost over 1%, the Dow almost 1%.
It topped off a bad week:
• The Dow dropped 2.8%, its worst week since December 2014, broke its 200-day moving average, and is in the red for the year.
• The Dow Transportation index fell 2.8%, its worst week since March, and hit a 9-month low, down 12% for the year.
•The S&P 500 dropped 2.1%, its third worst week in 20 15, and is up a mere 1% for the year.
• The Nasdaq dropped 2.2%, its worst week since March.
• The Russell 2000 swooned 3.1%, its worst week since October 2014
It didn’t help that Biotechs collapsed.
Biogen set the tone. It slashed its sales growth forecast for 2015 in half. Its multiple sclerosis drugs, its mainstay, are in trouble. Sales of Tecfidera, its main growth driver since its launch in 2013, ran smack-dab into reports linking it to brain infections. Sales of its injectable MS drug Tysabri and interferon-based MS drug Avonex both fell more than expected. And sales of Plegridy also disappointed. Shares of Biogen plunged 22%, wiping out $25 billion in stockholder wealth.
The Biotech ETF (XBI) dropped 3.6%. XOMA, which had already been eviscerated on Wednesday, dropped another 9.6% on Friday, to 94 cents, down about 80% for the week. A total of 25 biotechs in the index plunged over 5% on Friday.
Crude oil got hammered all week.
Particularly on Friday when WTI dropped to $47.97 a barrel, just weeks after $60 a barrel had been considered the new low going forward. Energy companies got slammed. Many of them are junk-rated, and their bonds sold off this week, dragging down the world’s largest junk-bond ETF (HYG) by 1.4%.
To continue reading: What the Heck Just Happened in the Global Markets?
