UnitedHealth Limits Dow Gains, Equities End Flat
U.S. equity markets were weighed down by declining oil prices and a slew of downbeat corporate headlines on Thursday.
The Dow Jones Industrial Average shed 4 points, or 0.02% to 17732. The S&P 500 fell 2 points, or 0.13% to 2080, while the Nasdaq Composite declined 2 points, or 0.03% to 5073.
The energy and health care sectors were the only decliners of 10 S&P 500 sectors.
Wall Street’s gains were limited on Thursday after a big, triple-digit rally in the prior session thanks to hawkish FOMC meeting minutes.
UnitedHealth Group (NYSE:UNH) was the biggest weight on the Dow, shaving more than 32 points off the broad index after the company slashed its profit outlook and said it was weighing whether to exit the Obamacare health-insurance exchange. Individual plans created under the Affordable Care Act have seen lower membership growth and more customer claims than had been expected since the inception. Shares of the world’s biggest health insurer saw steep declines.
The health-care sector dropped on the heels of the news as big names in the space, including Humana (NYSE:HUM), Cigna (NYSE:CI), Anthem (NYSE:ANTM), and Aetna (NYSE:AET) also saw declines in sympathy.
Elsewhere in corporate news, mobile payments company Square (NYSE:SQ) opened 30% higher in its debut on the New York Stock Exchange. The company traded above its $9 IPO price, which was 25% below the expected range of $11 to $13 a share. The price made the company’s market capitalization at $2.9 billion, far less than the $6 billion it earned in the private market.
It's worth noting that share performance among tech-related companies that have recently gone public is mixed. Box (NYSE:BOX), Lending Club (NYSSE:LC), and Etsy (NYSE:ETSY) are all trading below their IPO prices.
Online dating firm Match (NASDAQ:MTCH), which also priced at the low end of its expected range of $12 - $14, began trading at $13.50 a share. The company saw gains as it made its public-trading debut on the New York Stock Exchange shortly after Square shares began exchanging hands.
Best Buy (NYSE:BBY), meanwhile, took the wraps off its latest quarterly results. The electronics retailer recorded a 2.3% decline in revenue thanks to slow sales of tablets and cell phones. Shares of the company dropped 8%.
Matt Kaufler, portfolio manager at Federated Investors, said he sees one of the major themes of the market continuing to be a difficult retail environment. He pointed to Best Buy’s earnings Thursday as just the latest example on top of the disappointing quarterly figures from department stores last week.
“The department-store industry is just getting whacked pretty hard,” he said. “I think that’ll continue through the holiday – which is bad for retailers, but great for consumers because prices will be attractive.”
Meanwhile, focus remained on minutes from the Federal Reserve’s October meeting, which showed central bankers were more prepared to hike short-term interest rates at its December meeting.
Joshua Mahony, IG market analyst, said the minutes provided a hawkish view, but markets trended counter to policy implications as global stocks rose, while the dollar fell.
In recent action, the euro gained 0.88% against the U.S. dollar, while the greenback fell against a basket of global currencies. Meanwhile, the yield on the 10-year U.S. Treasury bond declined 0.028 percentage point to 2.241%.
“The meeting took place prior to this month’s bumper jobs report, which highlights that, barring an absolute shocker in December, Janet Yellen and Co. can achieve the 2015 hike they seek,” he said in a note.
Central bankers at the Fed reiterated at the last meeting that they will continue to closely monitor any and all economic data in the U.S. before they make a final decision to hike rates. The Labor Department said the number of Americans filing for first-time unemployment benefits fell last week to 271,000, as expected, from an unrevised 276,000 the week prior.
Meanwhile, the Philadelphia Federal Reserve said mid-Atlantic manufacturing activity was back in expansion territory. The activity factory gauge rose to 1.9 in November from -4.5 in October, coming in well above expectations for a rise to -1.
“Economic data continues to flow through in a confirming way and be supportive of the market,” Kaufler said. “Initial claims were in line with expectations and it’ll continue to fuel the expectation the Fed will gradually raise rates in December, and all of that will keep the positive underpinnings in the market.”
Elsewhere in the market, global oil prices dropped as worries about a global supply glut waned, and after comments from Wednesday from Dallas Fed President Rob Kaplan said global oil supply and demand might not find an equilibrium until the early part of 2017. U.S. crude prices fell 0.83% to $40.41 a barrel, while Brent, the international benchmark, rose 0.39% to $44.31 a barrel.
Metals were up as gold headed 1.32% higher to $1,082 a troy ounce. Silver gained 1.70% to $14.36 an ounce, while copper added 0.29% to $2.09 a pound