(Reuters) – U.S. stocks edged higher on Thursday on improved bets of an interest rate cut following Fed chief Jerome Powell’s dovish remarks, while healthcare stocks were mixed after the Trump administration withdrew a rule that would kill rebates.
Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., July 1, 2019. REUTERS/Brendan McDermid
Shares of pharmacy benefit managers gained as the news meant these companies would continue to benefit from after-market discounts from drugmakers. Health insurers and drugs distributors also rose.
A 5.5% gain in UnitedHealth Group Inc (UNH.N) helped the Dow Industrials briefly break above 27,000 points for the first time. Cigna Corp (CI.N) surged more than 12%, leading gains on the S&P 500 .SPX, while drug distributors such as McKesson Corp (MCK.N) rose 2.2%.
However, drugmakers such as Merck & Co Inc (MRK.N) dropped 3.1% and the Nasdaq biotech index .NBI slipped 1.66%.
The lack of progress in Washington suggests that the (healthcare) industry will face ongoing political pressure, including legislative risk, Morgan Stanley analyst David Risinger said.
“We see no solution to the challenges drug manufacturers face regarding growing rebates.”
The healthcare index .SPXHC, which is the worst performing S&P sector this year, was flat.
Stock markets were also supported by dovish comments from Powell, who began his second day of testimony before the Congress. He said on Wednesday that the central bank stood ready to “act as appropriate” to support record U.S. economic growth.
“Powell has telegraphed that they (Fed) are willing to accommodate the market as necessary and that’s very supportive,” Brian Larose, technical analyst at ICAP in Jersey City.