Investors had few expectations of something definite emerging
out of the European Summit and consequently benchmarks hovered in
the red during the morning session. Also adding to the concerns was
the Supreme Court's ruling in support of President Barack Obama's
healthcare law. However, markets made came off the day's losses in
the final hour as news of a "growth pact" being concluded during
the European Summit curbed the heavy losses to leave the benchmarks
only somewhat lower.
The Dow Jones Industrial Average (DJI) slipped 0.2% and closed
at 12,602.26. The Standard & Poor 500 (S&P 500) also edged
0.2% lower to finish yesterday's trading session at 1,329.04. The
tech-laden Nasdaq Composite Index dropped 0.9% and was lost 25.83
points to end at 2,849.49. The fear-gauge CBOE Volatility Index
(VIX) moved 1.3% higher to settle at 19.71. Consolidated volumes on
the New York Stock Exchange, American Stock Exchange and Nasdaq
were roughly 6.69 billion shares, slightly lower than the daily
average of 6.84 billion. Advancers moved past the declining stocks
on the NYSE; as for 54% stocks that gained, 42% stocks closed
A Supreme Court ruling that favored most parts of the Affordable
Care Act of 2010 was the biggest headline on the home front
yesterday. The news made its impact felt on the markets as
insurers, medical companies and businesses weighed their individual
pros and cons from the development. The ruling upheld the
"individual mandate" that requires every U.S. individual to buy
health insurance by 2014, failing which they will have to pay a
penalty. According to many, the new mandate will add to the costs
of businesses. Meanwhile, the law also significantly expands
Medicaid to take into account an additional 17 million low-income
people. Critics said businesses will have to bear the extra cost of
paying the insurance amount for employees and a market expert
opined that the additional burden is "not a way to get people off
the fence to hire people".
Insurers will also have to provide insurance to people with
serious diseases. Further, it is believed that insurers will now
face higher taxes and more regulations. Detailing the main
provisions a CNN money report opined that "insurers can't impose a
maximum lifetime dollar limit on a customer's medical care".
Hospitals will definitely have more patients visiting, but people
who had earlier opted out of medical treatment will now visit the
hospitals with insurance policies in their pockets.
The extra burden comes at a time when the economy eagerly awaits
decisions on spending and tax cuts. The new ruling is also the
"biggest overhaul of the $2.6 trillion healthcare system in about
50 years", Reuters noted. The ruling also set brings the political
battle to the fore. Obama viewed it as "a victory for people all
over this country whose lives will be more secure because of this
law and the Supreme Court's decision to uphold it". Meanwhile, Mitt
Romney, the Republican's presidential candidate, said: "If we want
to get rid of Obamacare, we are going to have to replace President
Obama. My mission is to make sure we do exactly that," and added:
"Repeal and Replace Obamacare".
Looking at the stocks of the health insurers, WellPoint, Inc.
), Aetna Inc. (NYSE:
), CIGNA Corporation (NYSE:
) and Health Net, Inc. (NYSE:
) slumped 5.2%, 2.7%, 2.7% and 2.3%, respectively. However, most of
the stocks in the healthcare segment moved higher with HCA Holdings
), Community Health Systems (NYSE:
), LifePoint Hospitals, Inc. (NASDAQ:
) and Universal Health Services, Inc. (NYSE:
) jumping 10.8%, 8.0%, 5.5% and 8.5%, respectively.
Addiitonally, initial claims showed signs of decline. The U.S.
Department of Labor reported a decline of 6,000 in seasonally
adjusted initial claims in the week ending June 23 and its stands
at 386,000, down from the previous week's revised figure of
392,000. Separately, the Bureau of Economic Analysis came out with
its third" GDP estimate and reported that "Real gross domestic
product -- the output of goods and services produced by labor and
property located in the United States -- increased at an annual
rate of 1.9 percent in the first quarter of 2012 (that is, from the
fourth quarter to the first quarter)".
However, investors were less focused on these economic readings
as the Supreme Court ruling overshadowed other domestic events.
Nonetheless, cross-Atlantic developments made its presence felt
amidst the domestic headlines and reports of European leaders
agreeing to a "growth pact" curbed a large chunk of the day's
losses. Herman Van Rompuy, President of EU, said the region's
leaders agreed to €120 billion worth of measures to boost failing
economies. Rompuy said: "What we already agreed is ... to boost the
financing of the economy by around 120 billion euros for immediate
growth measures…There are two countries that are very keen to
ensure there is agreement on long-term measures and short-term
European leaders are attending a key meeting in Brussels.
Investors had less hope of a definite direction to evolve from the
summit, as historically the meetings have failed to come up with
any definite solution. However, with this development, investors'
sentiment got a boost and domestic markets recouped a chunk of its
losses. It was in the last half-an-hour that benchmarks started
swinging upwards, and the rebound was well reflected with the Dow
curbing its losses by as much as 177 points to end just 25 points
AETNA INC-NEW (AET): Free Stock Analysis Report
CIGNA CORP (CI): Free Stock Analysis Report
COMMNTY HLTH SY (CYH): Free Stock Analysis
HCA HOLDINGS (HCA): Free Stock Analysis Report
HEALTH NET INC (HNT): Free Stock Analysis
LIFEPOINT HOSP (LPNT): Free Stock Analysis
UNIVL HLTH SVCS (UHS): Free Stock Analysis
WELLPOINT INC (WLP): Free Stock Analysis Report
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