Despite a strong final trading session to end the month, US equity markets continued to falter in September due to anxiety over the economic slowdown in China and other emerging markets. Consequently, the Federal Reserve, which was equally pressured by uncertain global economic developments as well as by the strong valuation of the US dollar, left short-term interest rates unchanged. The stronger dollar has already pressured earnings of multinational companies and hindered global trade. As such, US industrial production reports for September fell well below expectations.

Unfortunately, the Fed’s inactions did little to mitigate the market sell-off, as the Dow Jones Industrial, S&P 500 and NASDAQ declined 1.5%, 2.6% and 3.3% for the month, respectively. While the Fed remains steadfast on raising interest rates before the year’s end, a decline in the consumer sentiment index along with weak projected employment figures may prove otherwise. On the positive side, the US GDP growth estimate for the second quarter was raised 20 basis points to 3.9% due to stronger-than-projected consumer spending. Year to date, the Dow, S&P 500 and NASDAQ are down 8.6%, 6.7% and 2.4%, respectively.

Laboratory Instruments and Products

The Index contracted 5.1% in September to 212.96 and is down 4.3% for the year. Most companies traded in negative territory, led by Fluidigm, which slumped 33.5%. Fluidigm continued to be pressured following a disappointing second quarter earnings report in August (see IBO 8/31/15). Year to date, the company has dropped 76.0% and is trading well below its IPO price of $13.50 (see IBO 2/15/11).

Four other companies declined in double digits in September, including Pacific Biosciences, which fell 26.5%. Illumina and Bruker slid 11.0% and 10.6% for the month, respectively. On September 15, Morgan Stanley initiated coverage of Bruker with an “Equal Weight” rating and set a $21 per share price target.

Given the sharp decline in September, 16 of the 22 companies in the Laboratory Instruments and Products Index are now in negative territory, including 10 down in double digits.

Only three companies—Enzo Biochem, MTS Systems and NanoString Technologies—managed to withstand the overall downward market pressure in September. Enzo recorded the largest gain, climbing 8.6% for the month. MTS gained 1.0% for the month.

NanoString, which advanced 5.2% for the month, reaffirmed its full-year sales outlook of $60–$63 million at a meeting for analysts and institutional investors on September 11. The company reiterated its focus on the oncology market and highlighted its expanded addressable market of roughly $6 billion, of which 42% is concentrated in diagnostics. NanoString has recorded the largest year-to-date price increase in the Index, having gained 14.9%. Only five other companies in the Index are in positive territory for the year.

In other financial news, in an effort to reduce cash interest expenses and extend maturities on certain outstanding debt, VWR closed a $1.67 billion senior credit facility on September 30. The new loan consisted of a $910 million US-denominated term loan, a €460 million ($513 million) euro-denominated term loan, and a $250 million multicurrency revolving credit facility. On September 9, Moody’s Investors Services assigned a “Ba3” rating to VWR’s new senior secured credit facility.

There were several ratings changes this month. On September 10, Bank of America upgraded Waters from “Neutral” to “Buy.” Mettler-Toledo was upgraded by Citigroup from “Neutral” to “Buy” on September 8 but downgraded by Bank of America from “Buy” to “Neutral” on September 10.

Diversified Laboratory

For the month, the Index slipped 2.9% to 170.84. All companies traded lower in September, with the exception of Xylem, which improved 1.2%. Teledyne Technologies experienced the sharpest decline for the month, falling 7.8%.

Year to date, the Index is down 7.1%, with seven of the eight companies in negative territory. Roper Technologies is the lone company trading higher, up 0.2%. Having fallen 25.3% for the year, Corning continued to weigh on the Index.

On September 15, Danaher closed its senior notes public offering with net proceeds of roughly $1.98 billion to help repay a portion of the commercial paper used to finance the acquisition of Pall (see IBO 5/15/15).

On September 3, Goldman Sachs upgraded Illinois Tool Works from “Neutral” to “Buy.” On the same day, Stifel Nicolaus upgraded Xylem from “Hold” to “Buy” based on valuation.

International

Following a sharp sell-off in the previous month, Asia Pacific markets continued to trade lower in September. Japan’s Nikkei 225 slumped 8.0%, while China’s Shanghai Composite and Hong Kong’s Hang Seng Indexes declined 4.8% and 3.8%, respectively. China continued to weigh on the global markets, as manufacturing activity for the country fell in September to its lowest levels in over six years.

In September, prices for all Pacific Region companies in the IBO Stock Table contracted except for HORIBA, which advanced 1.8%. Precision System Science recorded the largest decline, falling 13.6%, and is down 40.6% year to date.

All major European equity markets also tapered off this month. The London FTSE 100 and German XETRA DAX fell 3.0% and 5.8%, respectively.

Most UK-based companies in the IBO Stock Table declined, led by Oxford Instruments, which slumped 30.7% for the month and is down 54.4% for the year. On September 8, the company lowered its fiscal 2016 revenue and earnings expectations due to weakness in the Industrial Analysis business in China and competitive pressure in the superconducting wire business. As of the end of August, organic orders and sales for the fiscal year to date were negative. However, adjusted operating profit managed to improve due to restructuring efforts. Berenberg Bank upgraded Oxford on September 18 from “Sell” to “Hold” due to the company’s low valuation. However, the investment bank cut its price target by 13% to GBX 700 ($10.87). On September 22, Jefferies Group downgraded the company from “Hold” to “Underperform,” and lowered its price target 42% to GBX 535 ($8.31).

Scientific Digital Imaging similarly experienced a significant decline for the month, falling 22.9%, but did not report any notable news.

Conversely, Abcam and Horizon Discovery improved 0.2% and 3.4% for the month, respectively. On September 11, Abcam reported that sales for the fiscal year ending June 30 climbed 12.6%, 14.2% excluding currency. Fiscal 2015 adjusted EPS rose 9.4% to £0.20 ($0.30). The company also raised its full-year dividend by 5.9% to £0.08 ($0.13) per share.

On September 21, Horizon Discovery reported that half-year sales climbed 110.8% to £8.6 million ($13.0 million) (see page 12) due to acquisitions, and strong demand for molecular diagnostic reagent and bioproduction products. Adjusted operating loss widened 158% as a result of R&D and acquisitions. Adjusted EPS widened roughly 71% to 8.3 pence ($0.13).