President Trump began the day with chief executives from the largest pharmaceutical and biotechnology companies in the country.  It was his classic carrot and stick gathering.  Although there wasn’t specific talk of retribution, it was made clear the industry must bring manufacturing and jobs back to the United States.  In return, there are commitments on several fronts including:

• Cutting regulations
• Streamlining approval process
• Fighting back against currency manipulation
• Forcing foreign competition to pay “fair share”

As the CEOs filed out of the meeting, their comments to the press was less ebullient than other industries and union leaders (save for Celgene CEO, Mark Alles, who chimed in about the positive nature of the meeting).

There is no doubt the industry could ‘play ball’ with the administration in return for a less onerous approval process and maybe longer exclusive periods.  Moreover, the industry is second to technology with respect to cash held outside the United States.  Back in 2004, when then President Bush got his repatriation tax reduction window approved, the industry held more cash than any industry.

Currently, drug companies are in the top ten foreign cash hordes:

• #4 PFE $79 billion
• #6 MRK $60 billion
• #8 JNJ $60 billion

For the moment, the street seems pleased with the meeting and potential mutual accommodations. Stocks of those companies are edging higher and the IBB exchange traded fund is higher.

IBB

U.S. nonfarm private sector employment was up 234,000 versus an expectation of 185,000.  Growth was across the board in business size.  While economist do not believe that this rate of change will continue as the labor market tightens, a slow down is not happening yet.

Job growth was highest in the service producing sectors. Despite colder weather in much of the country, construction added jobs.

Let’s see how the market  acts after the Fed release at 2pm, the last under Janet Yellen.