Stocks fell on Wednesday, with major indexes down in the morning on concerns about global growth, but largely recovering in the afternoon. The Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) closed with moderate losses.
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Earnings reports boosted homebuider stocks today, and the iShares US Home Construction ETF (NYSEMKT: ITB) jumped 2.1%. The healthcare sector lost ground, with the SPDR S&P Biotech ETF (NYSEMKT: XBI) sliding 2.2%.
As for individual stocks, Centene (NYSE: CNC) and WellCare Health Plans (NYSE: WCG) announced plans to merge, and Lennar (NYSE: LEN) said it's optimistic about the housing market this year.
Centene and WellCare want to merge
Health insurer Centene is aiming to buy smaller rival WellCare to create the country's largest insurance provider for government-sponsored healthcare programs. Shares of WellCare jumped 12.3% to $259.81 on the news and those of Centene slumped 5% to $52.12.
Centene is offering $120 in cash and 3.38 shares of Centene stock for each share of WellCare, which at closing prices today values WellCare at $296 per share, a premium of 28% over yesterday's closing price. Including assumed debt, the transaction is valued at $17.3 billion.
Centene and WellCare provide Medicare and Medicaid health plans, as well as insurance products for exchanges set up by the Affordable Care Act and coverage for the military. The combined company will have annual revenue of $97 billion and expects to find $500 million in annual cost savings.
The fact that WellCare stock closed 12% below the offering price indicates investors have some doubt the deal will go through as currently constituted.
Lennar sees improvement in the housing market ahead
Homebuilder Lennar missed expectations for first-quarter revenue and profit, but strong order growth and an upbeat assessment of the housing market were enough to push shares higher by 3.9%. A 31% increase in home deliveries due to the company's acquisition of CalAtlantic caused revenue to grow 36% to $3.6 billion and earnings per share to increase 40% to $0.74. Analysts were expecting EPS of $0.76 on revenue of $4.11 billion.
Lennar said weather issues across the country caused the company to miss its guidance for deliveries, but new order growth of 24% to 10,463 homes was about 5% over its guidance from three months ago. Average selling price increased 4% and operating margin on home sales improved from 9.8% to 10.6%.
Lennar, which beat expectations last quarter, said it sees "choppiness" in the market, but a pullback in mortgage rates and moderation of home prices is catalyzing the market, and the company is seeing increased interest in new home purchases.
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