With the start of earnings season just two weeks away investors are clearly confused as to which way the market will wander until then. Today, the broad-based S&P 500 (^GSPC 1.22%) largely meandered within a tight six-point range before ultimately inching lower.
The big economic report of the day was the release of June's Chicago PMI, which came in at a reading of 62.6. This is down from the 65.5 reading in May, but higher than the varying estimates on Wall Street which had been calling for a reading of 60 to 61. While in a perfect world we'd never like to see the Chicago PMI drop on a month-over-month basis, any reading above 60 signals robust expansion in the manufacturing sector, at least throughout the Midwest. This reading would imply that manufacturing and factory orders are likely going to remain strong in the interim.
Pending homes sales were another bright spot, rising 6.1% in May from just 0.5% in April. This jump certainly could be due to nicer weather, but it's important considering that new homes on the market for sale are rising. Homebuilders needs inventory to remain low in order to maintain their pricing power. If new homes or homes on the market for sale continues to rise without pending home sales rising in accord, then prices may slow or stop their upward trajectory and hurt all housing sector stocks.
By day's end, the S&P 500 had shed 0.73 points (-0.04%) to close at 1,960.23. This marks just the indexes fourth down day in the past 12 trading sessions.
Source: Gordon Tarpley, Flickr.
Leading all stocks to the upside today was first-person-viewpoint camera creator, and recent IPO, GoPro (GPRO 0.88%) which surged another 13.4%. The allure of GoPro continues to be its unique niche in the camera and social media setting, and consumers' love for the product. Both of these aspects could translate into big profits for GoPro over the long run. However, despite profits already being made from its 3.8 million cameras sold last year, GoPro is yet to fully capitalize on its social following aspect. It's begun prospecting to advertisers to draw in additional revenue, but I'm not certain its $5 billion valuation is merited considering how far it still has to go to move its product and brand-image further into the social realm.
Following closely behind GoPro is GW Pharmaceuticals (GWPH) which added 11.6% on the day to continue an incredible run since late April that has seen shares more than double. Today's pop was based on commentary from an analyst at Piper Jaffray who believes investigational drug epidiolex could wind up being a considering more effective and safe therapy for patients with Dravet syndrome, a rare type of epilepsy that affects children and young adults. The analyst in question also believes GW may find additional indications for epidiolex that would greatly increase its marketability. In response, Piper Jaffray kept its overweight rating on the stock but boosted its price target by 52% to $147.
Source: GW Pharmaceuticals.
While epidiolex has indeed shined in its early reviews, I would remind investors that there are no guarantees it'll be rewarded with any additional indications. A more pressing concern would be that GW's full-year losses are expected to extend in 2018 or beyond, so we're looking at a company expected to burn cash for quite some time trading at north of a $2 billion valuation. This has all the makings of pure emotional trading due to its tie-in's with discovering cannabinoids from marijuana plants, and as such I would suggest avoiding this possible bubble stock for the time being.
Source: Tulane Public Relations, Flickr.
Lastly, Amicus Therapeutics (FOLD 0.79%), a clinical-stage biopharmaceutical company, gained 10.2% after announcing that its final patient in a phase 3 study (known as Study 012) had completed their 18-month treatment period, and that it was on track to deliver the results from its study involving migalastat as a monotherapy treatment for Fabry disease by the third quarter. The study enrolled 60 patients and is testing oral migalastat against the current standard of therapy, enzyme replacement therapy. As Amicus noted in its press release, all but one of the 32 patients with GLP HEK amenable mutations that received migalastat chose to participate in the 12-month extension study.
What we're seeing today isn't really "new" in the way of data, but merely excitement from investors who've waited a long time to find out if migalastat is effective in a larger patient pool and over a longer period of time. If you recall, GlaxoSmithKline (GSK 0.89%) returned the rights to migalastat late last year after the oral drug failed to meet its primary endpoint at the six-month mark. The hope here is that a longer time period will yield more favorable results. Orphan drugs are sought after by big pharma and investors because they have lengthy patent protection periods and hefty price tags. For now, I'd suggest waiting this out until we have the actual data to comb through.
