Healthcare shares fend off US slump
THE Dow and S&P 500 stock indices both put in slight falls yesterday, recovering from sharper declines in earlier trading, as investors shrugged off weak consumer confidence data and focused on positive earnings reports.
Stocks in the healthcare sector led the afternoon rebound, with biotech shares rising a day after Amgen’s strong quarterly earnings report. The health insurance sector also rose after Coventry Health Care’s earnings topped Wall Street estimates.
Strong earnings have given a second wind to a stock market rally that wilted in June after a 40 per cent gain in the S&P 500 from its 12-year closing low in March.
“We’ve seen an 11 per cent rally in 2 weeks,” said Tim Smalls, head of US stock trading at Execution LLC.
He said that with the markets technically overbought, and looking for a reason to take a breather, yesterday’s slight decline is a good performance.
Smalls added that a lot of the afternoon recovery was linked to a poor US Treasury auction, as money shifted from bonds into the stock market.
Shorter-dated US Treasury debt fell after weak results in an auction of a record $42bn (£25.6bn) of two-year notes had some analysts wondering if the global appetite for US government debt might be waning.
The Dow Jones industrial average shed 11.79 points, or 0.13 per cent, to 9,096.72. The Standard & Poor’s 500 index dropped 2.56 points, or 0.26 per cent, to 979.62.
This also came after the US consumer confidence index declined by more than was expected in July, a second consecutive monthly fall, as a sluggish labour market continued to worry consumers, the Conference Board said yesterday.
But the Nasdaq Composite index gained 7.62 points, or 0.39 per cent, to 1,975.51.
Amgen’s stock rose 2.7 per cent to $62.42 on Nasdaq following the company’s release of much better than expected second-quarter earnings after Monday’s closing bell. The Dow Jones biotechnology index
Aetna jumped 12.6 per cent to $28.96 after at least three brokerages said the insurer’s recently-slashed 2009 earnings forecast is achievable.
But the energy sector’s shares weighed on the broader market as the weak consumer confidence data took a toll on oil prices, which had risen on optimism about the economic recovery. US crude oil futures dropped $1.15, or 1.7 per cent, to settle at $67.23 a barrel. The S&P energy index slid 1.5 per cent.
Exxon Mobil, down 1.2 per cent at $71.89, was the top drag on the Dow industrials index.