Stocks, led by health care companies, end up (all hail reform!)

Mar. 23, 2010

NEW YORK - Drug and hospital companies led stocks higher Monday after House lawmakers ended months of uncertainty and approved the health care overhaul bill.

The Dow Jones industrial average rose about 44 points. Broader indexes also climbed.

Investors had expected the health care bill would pass the House, but the approval late Sunday removed some of the anxiety that has dogged stocks of hospitals and drug makers. A bill with changes made by the House now goes back to the Senate for approval. Debate could begin Tuesday.

The 10-year, $938 billion bill will extend benefits to 32 million uninsured Americans. That will have far-reaching effects on health companies. With the bill in hand, investors could place bets on winners and losers. Hospital stocks rose on expectations they would see more business and increased revenue. Some insurers fell because of greater restrictions imposed by the changes.

Many key points of the bill will not take effect for several years, though others like provisions allowing children to remain on their parents' insurance until age 26 will kick in this year.

Hospital operator Tenet Healthcare Corp. rose 9 percent, while insurer UnitedHealth Group Inc. fell 3.2 percent.

"You've got some uncertainty here lifted," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. Ablin noted, however, that other industries will face higher costs to pay for wider coverage. "What it really comes down to is that as a result of this bill health care is a beneficiary at the expense of every other sector."

Stocks have been rising steadily in recent weeks as investors have grown more confident in a rebound following a string of improved economic reports. At the same time, much of the advance has come on light trading volume. That signals that not all the gains are tied to increasing expectations about the economy. Some analysts say that stocks are rising in a vacuum rather than because investors strongly believe that the market is poised to go higher.

The Dow rose 43.91, or 0.4 percent, to 10,785.89. It has risen 14 of the past 17 trading days and stands at its highest level since October 2008.

The Standard & Poor's 500 index rose 5.91, or 0.5 percent, to 1,165.81. The Nasdaq composite index rose 20.99, or 0.9 percent, to 2,395.40. It closed at a new high for the year and is at its best level since August 2008.

Bond prices rose, pushing down yields. The yield on the benchmark 10-year Treasury note fell to 3.66 percent from 3.70 percent late Friday.

The dollar fell against other major currencies. Gold fell.

Crude oil rose 57 cents to $81.25 per barrel on the New York Mercantile Exchange.

Stock fell Friday because of renewed concerns about budget problems in Greece. More questions about Greece hurt stocks early Monday. The country's debt woes have dragged down global stock markets on and off for nearly two months as the country tries to cut its budget deficit.

Investors have been worried that Greece and other European nations that use the euro, like Spain and Portugal, could struggle to recover as they try to pay down debt. That could upend a global economic recovery.

Questions about Greece arose again when Germany's chancellor said Sunday that a bailout for Greece won't be discussed at a European summit this week. But concern eased after European Central Bank President Jean-Claude Trichet said Monday that Greece wouldn't be able to dump the euro as its currency.

Meanwhile, retailers signaled that affluent consumers are stepping up spending. Jeweler Tiffany & Co.'s fourth-quarter profit quadrupled though earnings fell short of analysts' forecasts.

Williams-Sonoma Inc. said increased revenue boosted profits by more than sevenfold from a year ago, when one-time costs dented results. The seller of kitchen goods forecast stronger results for its current fiscal quarter.

The improvement in sales is a welcome sign for the economy as the end of the January-March quarter approaches.

Richard E. Cripps, chief market strategist for Stifel Nicolaus in Baltimore, is encouraged that expectations are growing for first-quarter profits. Corporate earnings are the biggest driver of the stock market.

"More analysts than not are choosing to increase their estimates and that's a good thing," Cripps said.

Tiffany rose 16 cents to $47.41, while Williams-Sonoma advanced $2.96, or 12.3 percent, to $27.10.

Google Inc. fell $2.50, or 0.5 percent, to $557.50 after the company stopped censoring the Internet in China by moving its search engine off the mainland. Visitors to Google's China service were redirected to Google's Chinese-language service based in Hong Kong.

Among health stocks, Tenet rose 52 cents, or 9 percent, to $6.27, while drug maker Pfizer Inc. rose 24 cents to $17.15.

UnitedHealth fell $1.09, or 3.2 percent, to $33.30.

Two stocks rose for every one that fell on the New York Stock Exchange, where volume came to 954.3 million shares, compared with 2 billion Friday. Trading was heavy because of the expiration of options and futures contracts.

The Russell 2000 index of smaller companies rose 9.02, or 1.3 percent, to 682.91.

Britain's FTSE 100 fell 0.1 percent, Germany's DAX index and France's CAC-40 each rose 0.1 percent. Markets in Japan were closed for a holiday.

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