Pulse check: Health care

01/08/21
  • Health insurers pivoted higher on Wednesday
  • Some sector leaders approaching all-time highs or key resistance
  • Haven collapse removing sentiment headwinds?

Action in certain sectors of the market on Wednesday suggest the Street may be positioning for policy and economic initiatives that seemed much less likely just a couple of weeks ago.

Bottom line, Democratic control of the Senate means the Biden administration’s policies have a much greater chance of crossing the finish line than they would under a divided government. Case in point: Wednesday’s rallies in financials and materials stocks, which were arguably driven by the possibility of accelerated economic stimulus, including infrastructure spending.

Another Wednesday winner: Health care, where Biden’s proposals have included providing a public health insurance option in states that didn't expand Medicaid, as well as increasing health insurance subsidies—both of which could increase the pool of insured individuals.1

Health benefits provider United Health Group (UNH), which was down as much as 2.8% early Wednesday, charged to the upside as the Georgia run-off results took shape, ultimately closing up more than 4% and tacking on more than 1.5% intraday yesterday to trade within $3 of its November record high of $367.95:

United Health Group (UNH), 9/14/20–1/7/21. United Health Group (UNH) price chart. Run-off reversal.

Source: Power E*TRADE


A similar move unfolded in CVS Health (CVS)—which, like Walgreen’s Boots Alliance (WBA), has already demonstrated more than a little resilience since getting knocked back in mid-November when Amazon launched its prescription service:

CVS Health (CVS), 9/14/20–1/7/21. CVS Health (CVS) price chart. Rallied near resistance.

Source: Power E*TRADE


The caveat for traders, as noted in “Financial fireworks,” is that these types of moves are susceptible to short-term give-backs—a tripwire for unwary momentum chasers, but a potential opportunity for patient traders who let the market come to them.

Finally, although it’s been overshadowed by other events of the week, Monday’s announcement that Amazon, JPMorgan Chase, and Berkshire Hathaway were pulling the plug on Haven, their joint healthcare venture,2 was not insignificant: When the power trio first revealed their plans to disrupt the health care space on January 30, 2018, health plan providers tanked—including UNH, which was the bigger loser in the Dow that day.

For now, at least, the big names in the industry may have one less thing to worry about.

Today’s numbers (all times ET): Employment Report (8:30 a.m.), Preliminary Wholesale Inventories (10 a.m.).

 

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1 Investor’s Business Daily. Georgia Runoffs Have Huge Stock Market Implications; Dow Jones Hits Record High, Nasdaq Falls. 1/6/21.

2 TechCrunch. The Amazon-Berkshire Hathaway-JPMorgan healthcare joint venture is officially ending. 1/4/21.

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