Health-Care Stock Rout Deepens Amid Political Pressure
April 17 2019 - 11:32AM
Dow Jones News
By Amrith Ramkumar
Health-care stocks are trailing the broader market by a historic
margin early in 2019, the latest example of how political shifts
have buffeted certain corners of the market.
With another slide early Wednesday, the S&P 500 health-care
sector is now up 0.1% for the year, compared with a 16% advance for
the broader index. If that gap holds through the end of the month,
it would mark just the third time since 2000 that an S&P 500
sector has lagged behind by a margin that big in the first four
months of the year, according to Dow Jones Market Data.
The largest deficit for health-care stocks previously through
April was 7.6 percentage points in 2010.
The group's latest declines have been sparked by a number of
signs that politicians on both sides of the aisle are vying for
tighter regulations ahead of the 2020 presidential election.
Insurers have been among the market's worst performers lately
amid uncertainty about the future of U.S. health-care policy. So
far this year, Cigna Corp. shares are down 22%, while shares of
Humana have fallen 18% and UnitedHealth Group Inc., the nation's
largest health insurer, have lost 13%.
Democrats in Congress have unveiled plans for a new federally
financed health system that would expand Medicare to everyone and
overhaul the Affordable Care Act. UnitedHealth Chief Executive
David Wichmann argued against so-called Medicare for All and other
broad government-coverage plans on the company's earnings call
Tuesday, saying they would disrupt health care and hurt Americans'
relationships with their doctors.
Shares fell 4% Tuesday even after the company raised its profit
guidance for the year and were down another 2.5% Wednesday. That
slide has sliced about $55 billion off the company's market value
since mid-November.
Meanwhile, the Trump administration is exploring whether to
expose the actual cost of care by requiring health-care providers
to publicly disclose secret prices they charge insurance companies
for services. The White House has also proposed banning certain
pharmaceutical-industry rebates in Medicare that would halt
billions of dollars in discounts that drugmakers give insurers and
companies such as CVS Health Corp.
The combination of policy proposals has hammered health-care
stocks, sending the S&P 500 health-care group to its lowest
level in three months. After falling 2% Tuesday, the sector shed
1.9% early Wednesday to bring its drop so far this month to
5.6%.
"People don't want the extra risk that goes along with being in
[health-care stocks] right now because of how quickly things can
change, " said JJ Kinahan, chief market strategist at TD
Ameritrade.
The recent rout in health-care stocks comes after the Trump
administration's stance on tariffs swung materials shares and
shares of companies reliant on trade flows with China in recent
months. The world's two largest economies have been negotiating for
months to end their tariff dispute.
Investors have said they are hesitant to wager on such sectors,
particularly when market-leading areas such as technology continue
to surge. Another negative for health-care bulls: Some analysts
consider the group a safer play because of its stable earnings and
relatively hefty dividends.
Assets considered safer have also lagged behind the market this
year as the Federal Reserve's cautious stance on raising interest
rates pushes investors toward riskier options.
The health-care sector's recent woes mark a sharp departure from
2018, when the group climbed 4.7% as the S&P 500 slipped 6.2%.
Bullish investors are hopeful that more upbeat earnings will help
share prices stabilize.
But some analysts are skeptical health-care stocks can quickly
rebound, with many policy debates expected to continue ahead of the
2020 presidential election.
"As we get to election season, the rhetoric around health care
tends to start heating up," Mr. Kinahan said. "That's a level of
risk you have to be willing to take."
Write to Amrith Ramkumar at amrith.ramkumar@wsj.com
(END) Dow Jones Newswires
April 17, 2019 12:16 ET (16:16 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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