Monday, March 22, 2010

Health Care Passed, Stocks Gain?

As odd as this may seem, the world did not come to an end as of last night when the US House of Representatives voted to move forward on historic health care legislation. While the bill still must be returned to the Senate if it is to include changes made by the House, President Obama is prepared to sign the existing legislation into law on Tuesday, March 23.

For the 14 months that health care has been a debating point on Capitol Hill, Wall Street has watched and observed closely, amid pithy warnings of damage to health-related stocks and other dire consequences of the sweeping reform.

However, after a brief dip at the open, stocks rallied, led by some of the very insurance companies which were supposed to be hurt the most by the legislation. Tenet Healthcare (THC), Universal Health Services (UHS) and Aetna (AET) - all health insurance providers - were among the best gainers on the day, rather than being sold down the river by speculators who see evil intent in the reform bill.

There are any number of possible reasons for gains in health-related stocks, though the most obvious are that the reforms don't fully take effect until 2013 in most cases, and the taxes levied on providers was substantially scaled back in the final bill. In the short-run - which, overwhelmingly is Wall Street's primary interest - health insurance providers will not be negatively affected. They remain at the heart of the system, and they still have various loopholes with which to exploit the more onerous - for them - provisions in the bill. Further, congress has mandated that all American citizens MUST have some form of health insurance coverage by 2013, a boon to the providers, since they are the primary dealers in such products.

So, health care reform should more accurately be described as mandated taxpayer expense, as this legislation marks the first time American citizens will be forced to purchase something or else face fines. It's a national mandate, and one that surely will not go down easy. A handful of state attorneys general are already busy crafting lawsuits challenging the constitutionality of the bill about to be passed into law. The debate will rage on for months - if not years - more.

Dow 10,785.89, +43.91 (0.41%)
NASDAQ 2,395.40, +20.99 (0.88%)
S&P 500 1,165.81, +5.91 (0.51%)
NYSE Composite 7,419.02, +32.17 (0.44%)

The markets were of their own minds today. Advancing issues outflanked decliners, 4224-2291, while new highs soared past new lows, 486-42. All of this occurred while the dollar was gaining against other currencies, a sign of strength for the markets and somewhat of an aberration, though not entirely outside the bounds of imagination and reality. A strong dollar and a rising stock market are certainly not mutually exclusive. Volume was again not particularly strong, bringing back arguments that the rally is based more on hope and insider dealings than actual economic worthiness.

NYSE Volume 4,868,379,500
NASDAQ Volume 2,325,247,000

After posting large early losses, oil bounded into the positive for the day, closing higher by 57 cents, to $81.25. Gold fell $8.10, to $1,099.30, though losses were steeper earlier in the day. The same was true for silver, off by a dime, to $16.92.

The trade today was highly suspect, owing to the sharp decline (Dow down 50 points) and quick reversal. Apparently, there's more to health care, stocks and markets than Wall Street veterans are allowing us to know. Either that, or cheap money is still being employed to boost share prices. Until something better comes along, Wall Street will continue to trade in what it knows best: equities. And until there comes an alternative, they will continue to rise.

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