Stocks rose on Tuesday, led by the health care sector after the government said it would alter payment rates for private Medicare insurers, and helped by data on factory orders that indicated the economy was steadily improving.
The Standard Poor’s 500-stock index and the Dow Jones industrial average closed at nominal highs, though the S. P. fell short of breaking above its milestone intraday high of 1,576.09.
The federal government dropped plans to cut payments for private Medicare Advantage insurers, and instead said it would allow a 3.3 percent raise.
The news improved shares of some health insurers, including Humana, which derives about two-thirds of its revenue from the Medicare Advantage business. The stock jumped 5.5 percent to $79.11 and was among the biggest percentage gainers on the S. P. 500. UnitedHealth Group gained 4.7 percent to $61.74.
“They didn’t expect the result that they got. That will help with their bottom line,” said Quincy Krosby, market strategist at Prudential Financial in Newark, N.J.
Strengthening economic data has helped stocks rally since the start of the year. On Tuesday, data showed February factory orders rose 3 percent, slightly above expectations. That follows a weak reading on manufacturing on Monday that sparked a pullback in stocks.
The S. P. 500-stock index is now up 10.1 percent since the start of the year.
For the day, the Dow Jones industrial average was up 89.16 points, or 0.61 percent, at 14,662.01. The S. P. 500 was up 8.08 points, or 0.52 percent, at 1,570.25. The Nasdaq composite index was up 15.69 points, or 0.48 percent, at 3,254.86.
The S. P. 500 surpassed its 2007 closing high last Thursday, while the Dow first broke above its 2007 record on March 5.
Stocks pared gains late in the session, giving investors another reason to question the strength of the recent rally.
“The recent legs of this rally have lacked a bit of conviction,” said Mark D. Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia. “What’s been leading equity markets has been more defensive sectors.”
Health care sector stocks are still seen as cheap relative to the overall market. Humana, which has a market cap of about $11.9 billion, has a forward price-to-earnings ratio of 9.4, below the S. P. 500 P/E average ratio of about 16.5. UnitedHealth has a P/E ratio of 10.6 and Cigna, 9.7 ratio.
“We do think that health care stocks are a nice combination of dividend yields, growth and low valuations, and we are very constructive on the sector,” said Jim Russell, senior equity strategist for U.S. Bank Wealth Management in Cincinnati.
Other big gainers in the health care sector included Cigna, up 2.9 percent at $64.75.
Moves are expected to be limited this week before Friday’s employment report.
The March jobs report could give clues on how successful the Federal Reserve has been in lowering unemployment, one of the primary headwinds for the economy.
About 200,000 jobs were created last month, according to a Reuters poll, down from 236,000 in February. The unemployment rate is expected to come in at 7.7 percent, unchanged from the previous month, the poll showed.
In an effort to bring down the unemployment rate, the Fed has maintained an accommodative monetary policy, which has also benefited stocks.
Other gainers included Hertz Global Holdings shares, up 6.8 percent to $23.41, after the company forecast strong earnings and revenue through 2015 as a result of increasing global demand for car rentals and benefits from its recently completed acquisition of Dollar Thrifty.
Among decliners, Delta Air Lines was off 8.1 percent at $14.94. Delta’s unit revenue for March rose at a slower rate than in the prior two months.
Shares of the Nasdaq OMX Group fell 12.8 percent to $27.91 after agreeing to buy a BGC Partners trading platform. BGC shares were up 48.6 percent at $5.72.
Shares of Hewlett-Packard fell 5.2 percent to $22.10 after Goldman Sachs downgraded them to sell.
Interest rates were steady. The Treasury’s benchmark 10-year note fell 8/32, to 101 8/32 and the yield rose to 1.86 percent from 1.84 percent late Monday.
Article source: http://www.nytimes.com/2013/04/03/business/daily-stock-market-activity.html?partner=rss&emc=rss
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