Sanders’ strength has been boosting health insurers, but that
may have changed after his surprise resounding win in Nevadages
Shares of UnitedHealth
Group Inc. plunged toward their worst day in nearly 9 years Monday, as the
narrative around a potential Bernie Sanders nomination may have swung to
negative from positive following the senator’s surprisingly big win in Nevada.
Other health insurer
stocks also took deeper dives than the broader stock market in afternoon
trading. Shares of Centene Corp. CNC, -8.08% ,
which provides programs and services to government-sponsored health-care
programs, plunged 10.2% to pace the 492 of 505 stocks on the S&P 500
index SPX, -2.58%
that were losing ground.
UnitedHealth’s
stock UNH, -6.20% sank
7.4%, to pace the losers in the Dow Jones Industrial Average DJIA, -2.71% , which dropped 973 points, or 3.4%. The
selloff put the stock on track for the biggest one-day decline since Aug. 8,
2011, when it dropped 8.0%. The stock has now shed 8.6% amid a 3-day losing
streak since it closed at a record $305.31 on Feb. 19.
Sanders’ resounding
victory in Nevada, after winning New Hampshire earlier in the month, cemented
him as the front-runner ahead of South Carolina’s primary on Saturday and
so-called Super Tuesday next week.
Although Sanders is an
advocate for “Medicare for All,” which would be a significant negative for
private health insurers, his previous primary victories were seen as good for
insurers, as Wall Street did not believe Sanders could beat Trump in a general
election. But the manner of his victory in Nevada may have spooked investors.
“Are the rising odds
of a Sanders nomination a negative catalyst for the sector (given his
health-care views) or a positive catalyst as odds-makers boost Trump’s
re-election chances?” wrote JPMorgan analyst Gary Taylor in a note to clients.
“We think most health-care investors cite the latter but actually fear the
former; which will render sentiment volatile and ephemeral over the next
several months.”
Keefe, Bruyette &
Woods managing director Brian Gardner said that while he agrees with the
market’s previous assessment that Sanders’ surge favors Trump, he acknowledged
that “conventional wisdom was against Donald Trump in 2016 much like it is sour
on Mr. Sanders’ chances now.”
On Feb. 12,
after Sanders won the New Hampshire primary, the
stocks of both UnitedHealth and Centene rose 4.4%.
Still, among other
insurers, shares of Cigna Corp. CI, -6.28% shed
7.1%, Humana Inc. HUM, -4.87% dropped
5.8%, Molina Healthcare Inc. MOH, -6.32% fell
7.4% and Anthem Inc. ANTM, -4.65% lost
5.1%.
Among hospital
operators, shares of Community Health Systems Inc. CYH, -11.49% tumbled
11.8%, HCA Healthcare Inc. HCA, -4.87% declined
5.6% and Tenet Healthcare Corp. THC, -3.44% fell
4.4%.
“We have repeatedly
heard from investors that they believe a Sanders nomination should be seen as a
boost to the re-election of President Trump and/or a boost to Republicans
winning full control of Congress,” wrote Raymond James Washington policy
analysts, led by Ed Mills. “We continue to view this election as Trump’s to
lose, but it is far closer than the market perception.”
The SPDR Health Care
Select Sector exchange-traded fund XLV, -2.49% lost
2.9% with 57 of 60 components losing ground. It has gained 2.2% over the past
three months, while the S&P 500 has tacked on 4.1%.
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