Key Highlights

● Ocular fell Friday with biotech, and no company-specific news was cited.

● The 10-year Treasury yield ended near 5.1 after topping 5.30 earlier in October.

● Smaller clinical-stage and tools names fell while a health-care fund hit a record.

● Abbott, Thermo Fisher, Danaher and Elevance report Oct 21.

Moving with biotech

Ocular Therapeutix (NASDAQ:OCUL), a drug developer focused on treatments for eye diseases, fell on Friday. Market data showed the shares moved with biotech on yields and cited no company-specific news. Ocular was grouped with Novavax (NASDAQ:NVAX) and QuidelOrtho (NASDAQ:QDEL) in a roundup of health-care stocks that plummeted.

Novavax plunged to about $11.20, while QuidelOrtho, a diagnostics company, fell as health care moved with yields, according to market data. Ocular's decline was smaller than Novavax's but reflected the same pressure on companies whose value rests largely on future product sales.

Ocular is developing therapies for retinal diseases, including wet age-related macular degeneration, a large market dominated by injectable drugs from major pharmaceutical companies. Like many biotechs, its valuation depends in part on expectations for products still in development, which makes the shares sensitive to changes in interest rates and risk appetite.

The rate story

The 10-year Treasury yield ended near 5.1. Earlier in October, it topped 5.30, its highest level since 2002, according to market reports. The yield eased over the week, but it remains high enough to weigh on long-duration stocks, whose expected profits lie years ahead.

The head investment strategist at the Franklin Templeton Institute said that "pressure across the long end of the curve acts as a valuation headwind for risk assets."

The Federal Reserve raised rates by a quarter point in September, its first hike in three years. Speaking at an IMF gathering in Bangkok, Fed Chair Kevin Warsh declined to preview the October decision. "I don't prejudge meetings," he said. Odds of an October hike fell sharply after spiking on Wednesday's hot consumer price report, according to market commentary, but futures still price roughly one quarter-point hike by December.

Health care divided

The day showed a sharp split within health care. Smaller clinical-stage, genomics and tools names fell, with market data listing PacBio (NASDAQ:PACB), Moderna (NASDAQ:MRNA), Azenta (NASDAQ:AZTA), Repligen (NASDAQ:RGEN) and Myriad Genetics (NASDAQ:MYGN) among the decliners. At the same time, the Health Care Select Sector SPDR Fund hit a record, as investors rotated toward defensive sectors.

The broader market was lower. The Russell 2000 fell 45.90 points to about 2,721 after opening higher, according to market data, while another report put the close at 2,719.57. The S&P 500 lost 84.62 points to 7,659.44, the Nasdaq Composite dropped 572.99 points to 26,140.03 and the Dow Jones Industrial Average slipped 175.28 points to 52,002.41. Technology led the declines, while energy, utilities and consumer staples gained. Over the week, the Russell 2000 lost about 85.6 points and the Nasdaq Composite had its worst week since June. The Cboe Volatility Index rose 3.53 points to 19.99.

Ocular Looks to Yields and Large-Cap Reports

Rates remain the main external driver for biotech stocks such as Ocular. The Fed's next decision is on Oct 28, followed by the personal consumption expenditures price index and the first estimate of third-quarter GDP on Oct 29. Housing starts arrive Oct 20 and the University of Michigan sentiment survey on Oct 23.

In health care, large companies including Abbott Laboratories (NYSE:ABT), Thermo Fisher Scientific (NYSE:TMO), Danaher (NYSE:DHR) and Elevance Health (NYSE:ELV) report on Wednesday, Oct 21, and Moderna's Phase 3 data on intismeran, developed with Merck (NYSE:MRK), is expected later this month, according to a market report.