Dow tops 27,000, healthcare in spotlight after Trump’s decision on rebate

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(Reuters) – U.S. stocks edged higher on Thursday on improved bets of an interest rate cut following Fed chief Jerome Powell’s dovish remarks, while healthcare stocks were mixed after the Trump administration withdrew a rule that would kill rebates.

Dow tops 27,000, healthcare in spotlight after Trump's decision on rebate

Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., July 1, 2019. REUTERS/Brendan McDermid

Shares of pharmacy benefit managers gained as the news meant these companies would continue to benefit from after-market discounts from drugmakers. Health insurers and drugs distributors also rose.

A 5.5% gain in UnitedHealth Group Inc (UNH.N) helped the Dow Industrials briefly break above 27,000 points for the first time. Cigna Corp (CI.N) surged more than 12%, leading gains on the S&P 500 .SPX, while drug distributors such as McKesson Corp (MCK.N) rose 2.2%.

However, drugmakers such as Merck & Co Inc (MRK.N) dropped 3.1% and the Nasdaq biotech index .NBI slipped 1.66%.

The lack of progress in Washington suggests that the (healthcare) industry will face ongoing political pressure, including legislative risk, Morgan Stanley analyst David Risinger said.

“We see no solution to the challenges drug manufacturers face regarding growing rebates.”

The healthcare index .SPXHC, which is the worst performing S&P sector this year, was flat.

Stock markets were also supported by dovish comments from Powell, who began his second day of testimony before the Congress. He said on Wednesday that the central bank stood ready to “act as appropriate” to support record U.S. economic growth.

“Powell has telegraphed that they (Fed) are willing to accommodate the market as necessary and that’s very supportive,” Brian Larose, technical analyst at ICAP in Jersey City.

At 11:21 a.m. ET the Dow Jones Industrial Average .DJI was up 183.33 points, or 0.68%, at 27,043.53, the S&P 500 .SPX was up 6.56 points, or 0.22%, at 2,999.63 and the Nasdaq Composite .IXIC was up 11.66 points, or 0.14%, at 8,214.19.

Delta Air Lines Inc (DAL.N) rose 1.3% after reporting a 39.3% rise in quarterly profit, as the carrier benefited from higher fares and flying fuller planes. This comes a day after American Airlines Group Inc (AAL.O) raised its estimate for second-quarter unit revenue. The S&P 1500 airlines index .SPCOMALI rose 0.39%.

A Labor Department report showed U.S. underlying consumer prices rose by the most in nearly 1-1/2 years in June, but that was unlikely to change expectations the Fed would cut rates this month.

Declining issues outnumbered advancers for a 1.19-to-1 ratio on the NYSE and a 1.49-to-1 ratio on the Nasdaq.

The S&P index recorded 34 new 52-week highs and three new lows, while the Nasdaq recorded 57 new highs and 32 new lows.

Reporting by Medha Singh, Manas Mishra and Manojna Maddipatla in Bengaluru; Editing by Sriraj Kalluvila and Shounak Dasgupta