Healthcare stocks rallied for a second straight day Thursday as artificial-intelligence anxiety swept across the market, prompting investors to seek shelter in the traditional safe-haven sector.
As chip stocks tumbled, the S&P 500 Health Care Sector Index was on pace for a record close on Thursday. At last check, the index was up 2.4% at 2,075.96; if it closes above 2,045.70, it will surpass its latest record, set on Aug. 19.
Gilead Sciences rose 3.5% to $158.97 on Thursday, on pace for an all-time closing high, according to Dow Jones Market Data. AbbVie, up 1.5% at $285.94, also was set to close at a record.
More than just drugmakers were participating in the rally: Healthcare services company Cardinal Health neared a record close of its own, rising 1.6% to $251.74. The same was true for lab-equipment maker Thermo Fisher Scientific, shares of which jumped 3.3% to $695.63 on Thursday.
The gains came as Wall Street rotated out of artificial-intelligence stocks and into healthcare, materials, and consumer staples, fueled by concerns over AI spending and stretched valuations. This momentum carried over from Wednesday, when hotter-than-expected inflation data rattled the market. The consumer price index, a measure of U.S. goods and services costs, rose by 0.6% month over month in September. That pushed the 12-month rate to 3.7%, marking a sharp acceleration from 3.4% in August.
While the number drove a move into less risky assets, it did little to boost expectations of an October rate hike, leaving room for the healthcare rally to gain ground. Rising interest rates pose a distinct headwind for biotech, the most innovative segment of the pharmaceutical industry. Because early-stage biotech companies are rarely profitable, their valuations rely on drug candidates that may not generate revenue for years or even decades. When discount rates rise, the present value of those distant cash flows drops significantly, driving down valuations.
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