By Peter McKay
Weakness in health-care stocks weighed on the broader market
Wednesday afternoon, leaving major indexes near the flat line as
investors assessed a new call by President Obama to pass federal
health-care legislation.
The market had rallied through most of the session, aided by
favorable readings of jobs, service-sector activity, and the
Federal Reserve's beige book of regional indicators. But the early
gains dried up late in the session.
The Dow Jones Industrial Average (DJI) was up more than 60
points at its morning high but recently skirted between gains and
losses. The measure was off seven points at 10,399.33, failing for
the second day in a row to hold a move into positive territory for
the year to date. If the Dow's current performance holds through
the close, the blue-chip measure would be off 29 points for
2010.
The Nasdaq Composite Index (RIXF) slipped 0.1%. The S&P 500
(SPX) was up 0.1%, helped by a 1.1% gain in its basic-materials
sector.
Pfizer Inc. (PFE) was the Dow's weakest component, off 1.6%
after Medivation said its experimental Alzheimer's disease
treatment Dimebon, which was in development with Pfizer, failed to
show effectiveness in a large late-stage study. The news sent
shares of Medivation (MDVN), which is not a Dow stock, plunging
66.9%.
Looking to push the "long and wrenching debate" over health care
into its final stages, Obama asked lawmakers to schedule a vote on
overhaul legislation "in the next few weeks."
Health insurers clung to gains after the speech but a number of
drug distributors lost ground after Obama proposed measures to
eliminate "wasteful" subsidies of pharmaceutical companies.
For months, health-care stocks have been sensitive to the
possibility that any possible changes in Washington might hinder
private providers' profit-making ability. The sector picked up a
bit in January when Republicans expanded their Senate minority - a
development that was thought by many to dim the prospects of
passage of a health bill. But on Wednesday, investors had to
grapple with the prospects that it might get through after all.
"A lot of the legislative news has already been priced into
these stocks, so they're not exactly getting killed," said Todd
Leone, head trader at Cowen & Co. "But at the same time,
passage of any bill would be a negative for the sector if and when
it happens. I think we're looking at about a 50-50 possibility of
that at this point."
The session's strong economic data helped basic-materials and
industrial stocks, which tend to be sensitive to the pace of global
recovery. Caterpillar Inc. (CAT) and Alcoa Inc. (AA) were up about
1.4% each, while General Electric Co. (GE) gained 0.9%.
Among stocks to watch, Novell (NOVL) surged 28% to $6.09,
topping an offer price announced late Tuesday from hedge fund
Elliott Associates and sparking speculation another software
company or hedge fund could step in with a higher bid.
Volume was light, with composite turnover in New York Stock
Exchange-listed companies recently hitting 3.4 billion shares.
The euro strengthened versus the dollar following Greece's
announcement of an austerity plan meant to address its debt crisis.
The U.S. Dollar Index (DXY) was recently off 0.7%.
The dollar's weakness helped to push up prices of raw materials.
The broad Dow Jones-UBS Commodity Index was up 1.1%, helped by a
1.5% jump in oil. Crude futures rose for a second straight day, up
$1.19 to $80.87 a barrel, the highest close in nearly two
months.
Treasury prices edged lower. The benchmark 10-year note was off
3/32 to 3.621%.