Health Care Jitters Spook Wall St
Australian healthcare stocks face a big sell off today after Wall Street sold off for a second straight session on Tuesday, weighed down by heavy losses in health-care and energy shares.
The Dow was down as much as 400 points after Amazon, Berkshire Hathaway and JPMorgan Chase announced they would partner in an effort to cut health care costs and improve services for their 1.1 million US employees and others.
The announcement sent shares of health care companies sharply lower.
As a result shares in Australian health related stocks such as Medibank Private and Nib will take a hit today as well, especially after Federal Opposition leader Bill Shorten indicated yesterday that private heath insurance and its rising cost would be a focus for the ALP in 2018.
The overnight futures market was down by just over 20 points for the ASX 20, on top of yesterday’s 50 point plus (0.9%) slide in the physical market.
Climbing US bond yields also weighed on Wall Street - the yield on the 10 year bond hit a new four year high of 2.734% during trading. Yields on other securities also rose, as did bond yields in Europe, Japan and elsewhere in Asia.
Investors are looking ahead to the State of the Union address by President Donald Trump, while a busy day for corporate earnings saw results from big names such as McDonalds Corp. and Pfizer Inc.
The Dow dropped 362.6 points, or 1.37%, to 26,076 with nearly all of the 30 components trading lower. Losses of 2% to more than 5% were seen among leading health-related stocks.
The news hit pharmacy-benefit managers, pharmacy chains and drug distributors, with CVS Health shares dropping 4.1%, Walgreens Boots shares lost 5.1%, Express Scripts Holding Company shed 3.1% and Cardinal Health shares dropping 1.8%.
Shares in leading US health insurers’ shares also fell significantly, including UnitedHealth Group which dropped 4.3%, Anthem, which dropped 5.3%, as well as Aetna down 3% and Humana down 3%.
The S&P 500 fell 31 points, or 1.1%, to 2,822 building on the previous day’s losses after it biggest fall for months on Monday.
The Nasdaq Composite Index declined 64 points, or 0.8%, to 7,402 ahead of results from Facebook and the three A’s Apple, Alphabet and Amazon.
Higher borrowing costs, which weighed on stocks Monday, showed no signs of letting up. Rising bond yields can crimp demand for assets perceived as riskier, such as stocks, particularly when those yields are higher than those of equities.
On Monday, the yield on the benchmark 10-year Treasury its highest level since April 2014, having touched an intraday high of 2.727%. The yield remained above the 2.7% level on Tuesday.
Politics and economics may provide a catalyst for investors, with Trump set to deliver his State of the Union address at 9 p.m. Eastern Time. Ahead of that, the Federal Reserve will begin its two-day policy meeting.
Crude-oil prices settled in negative territory on Tuesday, posting back-to-back session declines on renewed concerns about rising US crude production.
March West Texas Intermediate crude futures in New York lost $US1.06, or 1.5%, at $US64.50 a barrel and has continued to fall in early Asian dealings - down more than 1.6%. March Brent crude lost 44 cents, or 0.6%, to end at $US69.02 a barrel in London.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.