US stocks gained on Thursday and even a score of states suing drug companies did not dent returns in the healthcare sector of the S&P 500.
The S&P 500 closed up 0.4% at 2262, led by Universal Health Services (NYSE:UHS), up 6.9% to $108.57, while the S&P HealthCare sector gained 0.6%.
Twenty states on Thursday filed a lawsuit accusing Mylan (NASDAQ:MYL), Teva (NYSE:TEVA) and four other drug makers of illegally fixing prices for two drugs, amid widening scrutiny into the market for generic drugs.
The states’ lawsuit said that the six generic drug makers – which also include Heritage Pharmaceuticals, Aurobindo Pharma USA, Citron Pharma and Mayne Pharma – “entered into illegal conspiracies in order to unreasonably restrain trade, artificially inflate and manipulate prices and reduce competition in the United States for two drugs,” according to a press release from Connecticut’s attorney general, who is leading the investigation.
A week ago, US President-elect Donald Trump vowed to bring down high drugs prices.
Mylan shares ended higher, by 0.2% to $37.76, but Teva was down 0.7% to $36.73.
The S&P Midcap 400 ended up 0.4% at 1670 and led by Interdigital Inc (NASDAQ:IDCC) up 7% to $90.70.
The S&P Smallcap 600 finished up 0.9% to 846 and led by Flotek Industries (NYSE:FTK) up 10.8% to $10.63.
Early trading
US stocks powered higher on Thursday, led by banks lapping up the Federal Reserve’s rate rise, while market feels good about housebuilding sentiment now running at its most bullish in over a decade.
The S&P 500 market bellwether was up 0.5% to 2264. The top gainer was also Wednesday’s biggest loser: hospitals operator Universal Health Services, Inc. (NYSE:UHS), up 6.6% to $108.27. The health sector has had a rough week since US President-elect Donald Trump said he would clamp down on rising drug prices.
But the gains were purely technical. UHS was huge mover today with more than 1mln shares trading hands. Universal Health Services has declined 23.81% since May 12 and is downtrending. It has underperformed the S&P 500 by 32.98%. UHS saw brisk business of over 1mln shares traded.
UHS may have been the biggest price riser, but the second-highest riser had volumes to beat. Global snacks maker Mondelez (NASDAQ:MDLZ), which owns Cadbury’s, was up 6% at $45.41 on volumes of 8.6mln shares. Rumours swirl that it might tie up with rival Kraft Heinz (NASDAQ:KHC), whose shares were up 1.7% at $85.75.
The shares of US financial groups jumped as bond yields extended their rise, lifting the benchmark equity indices after a decline in the previous session. Bond yields, especially at the short-end of the yield curve, tend to rise when the cost of borrowing rises. The Fed hiked interest rates by 25 basis points on Wednesday, the first time in a year.
The S&P 500 financials sector was up 1.1 per cent, led by a 1.6 per cent rise in bank shares. Lenders are seen as key beneficiaries of higher interest rates since they profit on the difference in the rates they charge on loans and their own funding costs.
Among the gainers were Wells Fargo & Company (NYSE:WFC) up 2.5% at $56.07 and a massive 9mln shares traded, while Lincoln National Corp (NYSE:LNC) was up 2.5% at $67.90, and Met Life (NYSE:MET) up 2.45% to $57.77 on 1.7mln shares.
But the runaway trade was Bank of America (NYSE:BAC), whose volumes easily topped the S&P 500 traffic with 52mln traded and the shares were up 2.3% to $23.18. The next biggest volumes came from oil group Chesapeake (NYSE:CHK), of 21mln shares, on lighter price gains of 0.4% to $7.11.
On the other end of the spectrum, most energy shares were under pressure as the price of oil fell for the second day in a row. The US oil benchmark WTI was down 1.2% to $50.43. Real estate and utilities stocks also declined as the rising rates dimmed some of the appeal of the consistent dividend streams that they offer. Among decliners were Murphy Oil Corp (NYSE:MUR) down 2.2% to $32.09, and Newfield Exploration Company (NYSE:NFX) down 1.7% to $45.10.
Gold, which is dented by both higher yields and a stronger dollar, fell about 1 per cent to a 10-month low of $1,131.22 a troy ounce.
Sentiment among American home builders has jumped to the highest level since the housing bubble in 2005 as optimism following the US election eclipsed rising mortgage rates in the wake of the Fed’s rate hike.
The National Association of Home Builders said its sentiment gauge jumped to 70 in December, from 63 in the month prior, marking the highest reading since July 2005.
Th S&P Midcap 400 was up 0.9% at 1679 led by Interdigital Inc (NASDAQ:IDCC) up 11.3% to $94.30 after the mobile technology research and development company announced it has updated its expectations for total fourth quarter 2016 revenue upwards to be between $258mln and $268mln.
The top mid-cap decliners were energy stocks. Gulfport Energy Corp (NYSE:GPOR) was down 10.8% to $23.99, while Royal Gold Inc (NYSE:RGLD) lost 4.7% to $63.36, and Sm Energy Company (NYSE:SM) was down 1.6% to $34.50.
The S&P Smallcap 600 advanced by 1.4% to 850 and led by telecoms group 8X8 Inc (NASDAQ:EGHT) up 7.3% to $15.35 after the company released a new study that highlights how Generation Z, which will enter the workforce in earnest in 2017, will change the workplace, especially as it relates to business communications.
Pre-Open
US stocks are expected to open flat on Thursday as bad news for internet company Yahoo (NASDAQ:YHOO) cancels out strong US manufacturing data.
The market is also still coming to terms with the Federal Reserve’s rate hike on Wednesday. Although fully priced in, the market still went south after the announcement. Ironically, US November core consumer price inflation was tamer than expected, rising by 2.1% year-on-year but forecast at 2.2%.
The S&P 500 is indicated flat.
Shares in Yahoo are slated to drop Thursday after the company admitted to another hack that may have affected more than 1 billion accounts.
The breach dates back to 2013 and is thought to be separate from a massive cyber security incident announced in September.
The new hack threatens Verizon's (NYSE:VZ) $4.8bln deal to buy Yahoo, given the hit to Yahoo's brand.
Yahoo shares were down 2.5% at $39.89 pre-market.
Meanwhile, the market may get some lift from rumours that two food giants are reportedly considering a major combo.
Shares in Oreo-maker Mondelez International (NASDAQ:MDLZ) surged by 3.9% to $44.48 pre-market, based on some rumours that Kraft Heinz (NASDAQ:KHC) is considering a takeover.
A deal would be unusual because Mondelez was spun off from Kraft back in late 2012. But that kind of break up to make up has happened on numerous occasions in the corporate world.
Kraft shares were 1.3% higher at $85.43 pre-market.
If that doesn’t lift the market’s sombre mood, maybe the manufacturing data ought to.
The Philadephia Fed Manufacturing Index jumped to 21.5 in December. It had been forecast to edge higher to 9.0.
Meanwhile, the New York Empire State Manufacturing index more than doubled to 9.0 in December versus a forecast of 4.0.