Health-Care Rally Helps Lift Dow Over 27000
July 11 2019 - 1:41PM
Dow Jones News
By Nathan Allen and Michael Wursthorn
A rally in health-care stocks pushed the Dow Jones Industrial
Average over 27000 for the first time after the Trump
administration abandoned a plan to curb drug rebates.
The decision canceled a proposal that would have eliminated
rebates from government drug plans, easing concerns of a massive
disruption to the U.S. pharmaceutical industry. Shares of
UnitedHealth jumped more than 5%, leading the Dow industrials
higher, while gains among shares of Cigna and CVS Health lifted the
S&P 500.
Stocks got further support from Federal Reserve Chairman Jerome
Powell's doubling down on signals that the central bank could cut
interest rates later this month. Speaking during a second day of
congressional testimony, Mr. Powell reiterated the Fed's intention
to "act as appropriate to sustain the expansion."
The Dow industrials gained 201 points, or 0.7%, to 27061, while
the S&P 500 added 0.3%. The Nasdaq Composite rose 0.3%. Major
U.S. indexes extended their gains from Wednesday's session, helping
to reverse stocks' recent faltering amid concerns that investors
were overestimating the likelihood of a rate cut.
Although investors continue to disagree on how much the Fed will
cut rates -- opinions vary on whether the central bank will slash
by a quarter of a percentage point or half of one -- several said
Mr. Powell's comments all but guarantee at least one rate cut as
soon as this month. And that supports continuing to hold sizable
positions in U.S. stocks, some money managers said.
"With the Fed looking almost certain to cut rates in the coming
weeks, it is important to position portfolios properly regardless
of the outcome," Mark Haefele, global chief investment officer at
UBS Global Wealth Management, said in a note to clients on
Thursday, recommending holding more stocks and cash over
short-maturity U.S. government bonds.
Optimism around a rate cut helped push the Dow industrials on
the last leg of its journey to 27000. While the milestone doesn't
bare any significance on the market, the new high underscored
stocks' wild ride since last year's selloff.
If the Dow maintains its gains, 372 trading days will have
passed since the blue-chip index closed above its last watermark,
26000, in January 2018. Stocks fell a month after that, entering
correction territory. Stocks nearly recovered before the fourth
quarter's punishing selloff unraveled the market's gains, nearly
ending its bull run.
But 2019 has been different. Fed officials eased up on monetary
tightening, announcing earlier this year it would hold rates steady
to keep the economy growing. Resurgent trade tensions in May and
deteriorating conditions in Europe and Asia now appear to be
pushing the Fed to consider its first rate cut in more than 10
years.
The Dow industrials have risen 16% so far this year, while the
S&P 500 has jumped 20%, with much of those gains following the
Fed's encouragements of a rate cut.
On Thursday, shares of UnitedHealth gained 5.5% in recent
trading, on pace for its biggest gain in more than a year. Boeing,
a trade-sensitive stock, also contributed to the Dow's climb,
rising nearly 2%.
In the S&P 500, Cigna jumped 11%, cutting its year-to-date
decline to 6.4%, while CVS Health added 4.3%. Despite the gains,
the S&P 500's health-care sector struggled as shares of biotech
firms, pharmaceutical companies and life sciences shops broadly
declined.
Technology and industrial stocks also notched solid gains
following Mr. Powell's comments, with both sectors up 0.6% in
recent trading.
U.S. government-bond yields, meanwhile, extended early gains
after data showed that consumer prices rose in June, a sign
inflationary pressures could be stabilizing after a period of
weakness. Core inflation, which strips out volatile food and energy
prices, rose faster than expected. The yield on 10-year U.S.
Treasurys climbed to 2.087% from 2.061% a day earlier. Bond prices
and yields move in opposite directions.
Elsewhere, minutes from the European Central Bank's June policy
meeting showed that officials are likely to consider injecting
fresh stimulus into the eurozone in light of weak inflation data.
The minutes suggest policy makers will weigh cutting the bank's key
interest rate or restarting its EUR2.6 trillion ($2.92 trillion)
bond-buying program.
Stocks in Europe edged lower, reversing an earlier gain, as the
pan-continental Stoxx Europe 600 declined 0.1%.
Write to Michael Wursthorn at Michael.Wursthorn@wsj.com
(END) Dow Jones Newswires
July 11, 2019 13:26 ET (17:26 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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