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Chinese Trade Numbers Fall for 16th Straight Time: Effect on XLV

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Market outlook

The weak Chinese trade numbers brought the bears back into the market. Chinese exports fell 25.4% on a year-over-year basis, and imports fell 13.8%, marking the 16th straight monthly decline. The export numbers are the worst we’ve seen since May 2009. This news weighed on the US Market. The Dow Jones Industrial Average fell 0.65% in yesterday’s trade, and the SPDR S&P 500 ETF (SPY) fell 1.1%. Biotech ETFs followed suit with the Health Care Select Sector SPDR Fund (XLV) falling 1.2%.

The above table gives an overview of XLV and its top performers along with SPY in yesterday’s trade. XLV closed at $67.12 and was trading above its 20-day moving average of $66.2. On a YTD (year-to-date) basis, the ETF has fallen 6.8% and has underperformed SPY.

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XLV’s top gainers

Dentsply International (XRAY), Cerner (CERN), and Henry Schein (HSIC) were the top gainers within XLV yesterday with returns of 0.9%, 0.3%, and 0.2%, respectively. Dentsply International rose on higher trading volumes. It saw 3.1 million shares traded as compared to the three-month average of 1.8 million shares per day.

Cerner gained marginally as it announced a $300 million share repurchase program. Based on yesterday’s closing price of $52.79, approximately 5.7 million shares, or 1.7% of the company’s outstanding shares, can be repurchased. This will probably improve value for the remaining shareholders in the long run.

Cerner was trading above its 20-day moving average of $52.50. On a YTD basis, the stock has fallen 12.3%. It has a book value of $11.20 per share. With its current price, the stock is trading at a PBV (price-to-book value) ratio of ~4.7x and a forward PE (price-to-earnings) ratio of ~22.5x for 2016. Cerner has a weight of ~0.6% in XLV’s portfolio.

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