Shares of drug and medical-device makers, widely considered a dependable investment, may be a refuge when the US market reopens next week after Tuesday's terrorist attacks, analysts said.
Pfizer Inc, Merck & Co, Johnson & Johnson and other big drugmakers are often seen as a bulwark against adversity because their profits tend to be steady regardless of the direction of the broader economy.
"When you have uncertainty, that hurts the market; people will go to where the certainty is," said David Saks, chief investment officer of Saks Medscience Fund. "Health care will probably be one area where people will feel is the least adversely affected in terms of economic impact." US stock markets have been closed since Tuesday morning, when hijackers drove airliners into New York's World Trade Center and the Pentagon. The attacks sparked concern that the economy, already sputtering as profit growth slows and companies cut spending, could slip into recession for the first time in a decade as consumer confidence wanes.
Investors said recent trading in European drugmakers may indicate sentiment for the US pharmaceutical industry.
Shares of GlaxoSmithKline Plc, the second-largest drugmaker, have risen 11 percent since Tuesday in London trading. Shares of AstraZeneca have risen about 9 percent.
"The best place to look is Europe and Japan in terms of the markets reactions," said David Katz, chief investment officer at Matrix Asset Advisors Inc. "The original knee-jerk reaction the day of the attacks was that Europe sold off substantially, and the following day it started to recover, and they are higher today." While most of the US investment community focuses on finding colleagues and loved ones and assisting in the physical and emotional recovery, market officials are trying to find a way to reopen markets without interfering with the rescue efforts blocks away.
Richard Grasso, chairman of the New York Stock Exchange, said US stock markets will open at 9:30am next Monday in New York. The markets couldn't open on Friday because of concerns that telecommunications systems, disrupted when the World Trade Center towers collapsed, wouldn't be ready, Grasso said at a meeting of exchange officials, securities firms and regulators.
US bonds began trading yesterday after a two-day halt.
Abbott Laboratories Chairman and Chief Executive Miles White said that while it's difficult to predict investor reaction once the market opens, the US remains strong and Abbott expects "no change" in its own performance.
"We think that it is important that these realities guide investors' response when the trading on the US stock exchange resumes," White said.
Uwe Reinhardt, professor of economics and public affairs at Princeton University, said he doesn't expect deep job cuts even if the US economy slips into recession, and he doesn't expect health-care spending to drop.
"Among rational investors, I don't think it should have any impact at all. If there are some budget adjustments, people will take from other areas -- they may not go out to dinner -- but they won't budge from health-care'' spending, Reinhardt said.
Laurel Gormley, analyst for the Health Sciences Fund at John Hancock Advisers Inc, said some health insurers may have to overcome the effects of the tragedy as claims rise.
The government health-care programs Medicare and Medicaid and private insurers including Oxford Health Plans Inc assured patients and health-care providers they will be reimbursed for emergency care and urged them to treat patients immediately.
As well, biotechnology companies may fall when US markets reopen, analysts said, since skittish investors may be less likely to risk capital for development-stage ventures.
"Biotech is synonymous with aggressive growth, high- potential growth and high risk," said Medscience's Saks. "While the future looks bright for biotech, money will be reluctant to go there." Whether confidence proves to be shaken enough to put the domestic economy into recession, analysts predict investors will play it safe in the first days of post-attack trading.
"I don't think anybody really knows, but most folks seem to tilt toward thinking this [attack] will have a traumatic negative effect on the economy," said Erik Anderson, an analyst at Sit Investment, which holds Merck, Eli Lilly & Co and Pfizer.
"This is not a financial crisis that's happened in the system, [but] for those that have certain fears about a deeper recession, it is certainly going to enhance the pharmaceutical group."
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