quote:
By CHRIS DIETERICH AND BEN EISEN
Oct 11, 2016 4:57 pm ET
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Traders dumped biotechnology stocks on Tuesday over concerns that a one-sided election could hand Democrats control of Congress, a make-up likely to favor lower drug costs.

The $7.6 billion iShares Nasdaq Biotechnology exchange-traded fund, which owns shares including Amgen Inc., Celgene Corp. and Biogen Inc., dropped 3.8%, its sharpest decline since June 24 – the day global markets shuddered on the heels of Britain’s “Brexit” referendum.

Health-care stocks in the S&P 500 fell 2.5%, roughly double the decline in the S&P 500. The iShares U.S. Pharmaceuticals ETF fell 2.6%.

Biotech and pharmaceutical stocks, which tend to be generally volatile, have been even more so over the past year amid concerns about a crackdown on fast-rising prices for specialized drug treatments. Just over a year ago, a tweet from Democratic presidential nominee Hillary Clinton that mentioned “price gouging” helped grease a biotech slide from which large-cap biotech stocks have yet to recover.

“Most people have pointed to healthcare as a sector that would be under pressure from a Democratic sweep,” said James Tierney, chief investment officer of concentrated U.S. growth at AllianceBernstein Holding. “I think the volatility in healthcare will be elevated for the next 28 days or so.”

Biotech stocks started the session lower, though the widening rift within the Republican Party appeared to exacerbate biotech stocks’ slide, traders said.

Republicans are feuding over whether to support their party’s presidential nominee Donald Trump after a video surfaced showing Mr. Trump using crude language about women. House Speaker Paul Ryan on Monday told House colleagues to do what they needed to survive politically, while he would neither campaign for nor defend their party’s presidential nominee. The intra-party bickering had Wall Street’s inside-the-beltway strategists buzzing this week about whether a big loss by Mr. Trump could wipe out the Republican majority in the House of Representatives.

“There’s a growing GOP panic that a landslide is looming,” wrote Greg Valliere, chief global strategist at Horizon Investments, on Tuesday. “For the financial markets, this election suddenly is a big deal.”

Anxiety about biotech in particular was evident in the options market on Tuesday as traders targeted November-expiry contracts that profit from declines in the SPDR S&P Biotech ETF. Alison Edwards, who sits on the options-trading desk at Susquehanna Financial Group, reported a “steady wave of protective November trading.”

“The threat of a Clinton White House, underscored by near-term disappointment may be weighing on investors’ confidence in the sector,” said Jack Ablin, chief investment officer at BMO Private Bank.