Wall Street pares losses late, ends modestly lower

NEW YORK Thu Jun 28, 2012 5:17pm EDT

1 of 5. Traders work on the floor of the New York Stock Exchange, June 25, 2012.

Credit: Reuters/Brendan McDermid

NEW YORK (Reuters) - Stocks fell on Thursday but pared back sharp losses late in the session on talk of progress by European leaders in easing the region's debt crisis, while a Supreme Court ruling upholding a landmark healthcare law hit large health insurers.

Markets are especially skittish about any shift in expectations for the euro zone as European Union leaders met on the first day of a two-day summit in Brussels.

"This is a process that is just going to wind on and is going to bring us periodic bouts of volatility in our markets depending on the news flow," said Matt Kaufler, portfolio manager at Federated Investors in Rochester, New York.

Stocks began lower and losses accelerated after a divided U.S. Supreme Court backed the centerpiece of President Barack Obama's healthcare overhaul law.

The decision surprised many investors who see the law, which requires that most Americans obtain insurance by 2014 or face a penalty, as a hallmark of a business unfriendly administration.

Shares later pared losses, though major insurers such as Aetna Inc (AET.N), which face more regulation, ended lower. Other companies reliant on Medicaid, such as Wellcare Health Plans Inc (WCG.N) rose as their patient rolls are expected to increase.

The Morgan Stanley healthcare payor index .HMO added 0.6 percent. Aetna ended down 2.7 percent to $39.85; Wellcare jumped 8.8 percent to $53.98.

"Because it was such an unexpected result from the Supreme Court today you knew the market had to have at least a short-term violent reaction," said Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis.

"At the end of the day what does it really change for the performance to the end of the year - probably not much."

Shares of JPMorgan Chase & Co (JPM.N) dropped 2.5 percent to $35.88 after a New York Times report projecting that losses from a recent botched trade could reach $9 billion, more than four times the original estimate. A Reuters report estimated the losses between $4 billion to $6 billion.

U.S.-traded shares of Barclays (BCS.N) slumped 12.1 percent to $10.84 after Britain said it had brought in the fraud squad to investigate possible crimes over attempts to manipulate lending rates, a scandal that is expected to spread to other banks. Lloyds (LYG.N) fell 3.6 percent to $1.87 in New York.

As EU leaders began the two-day summit, finance officials were working on urgent measures to diminish financial market pressure on Spain and Italy, which may prove to be more difficult to bail out than smaller nations in the euro zone.

Recent statements from German Chancellor Angela Merkel have been at odds with those of other European leaders on how to deal with the crisis, underscoring the difficulties in reaching common ground.

The Dow Jones industrial average .DJI dropped 24.75 points, or 0.20 percent, to 12,602.26. The Standard & Poor's 500 Index .SPX shed 2.81 points, or 0.21 percent, to 1,329.04. The Nasdaq Composite Index .IXIC lost 25.83 points, or 0.90 percent, to 2,849.49.

Commenting on the market's late day bounce back, traders pointed to two block S&P e-mini contracts traded in the last half hour that may have helped to spike buying interest.

More than 28,000 S&P e-Mini futures contracts traded at 3:34 p.m. as the market jumped, the heaviest one minute of volume since the morning.

"They are thinking they might get something done in Europe - don't believe the hype. This has been a four, coming up on a five-year problem and I don't see it going away. " said Jason Weisberg, managing director at Seaport Securities Corp in New York.

Also weighing on the financial sector, Citi Investment Research posted a bearish note on several U.S. banks including Bank of America Corp (BAC.N) and Goldman Sachs (GS.N) as the slow economic recovery hurts trading.

Bank of America Corp (BAC.N) shares slipped 0.4 percent to $7.74, while Goldman Sachs (GS.N) edged up 0.2 percent to $93.49. The KBW bank index 0.4 percent.

After the close, Nike Inc (NKE.N) slumped 10 percent to $87.20 after the footwear maker posted a quarterly profit that missed Wall Street estimates.

Volume was modest with about 6.69 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, slightly below the daily average of 6.84 billion.

Advancing stocks outnumbered declining ones on the NYSE by 1,697 to 1,282, while on the Nasdaq, decliners beat advancers 1,537 to 955.

(Reporting by Chuck Mikolajczak, additional reporting by Rodrigo Campos; Editing by Kenneth Barry)

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Comments (7)
mulholland wrote:
Banks eyed. Sherlock. Banks hold $15 Trillion of sovereign debt . Th intention of paying the debt. They are squirming to borrow to pay the interest on the debt and have no offers. Least of all Germany.

Jun 28, 2012 8:44am EDT  --  Report as abuse
mulholland wrote:
They have no intention of paying the debt.

Jun 28, 2012 9:47am EDT  --  Report as abuse
taxcorps2 wrote:
Typical knee-jerk market reaction. Effect of the law will be to drive down costs of insurance via larger enrollments, and likely, the overall cost of health care. That is what most people, other than big-ticket health care manufactures and large, high-cost providers, have wanted or give lip-service to.

So what is wrong with spreading and controlling health care costs?
We do know that many of the objectors to the law have not been in the position of having to buy their own individual health care coverage, of dealing with the pre-existing issues in buying coverage. One example of such is unreasonable riders excluding any coverage on a person’s spine because that person has received chiropractic care, which only has made their spine more functional and healthier.

I don’t know the following factually, but have heard about news reports that some health ins. carriers have found that the portions of the Affordable Care Act that have been implemented have helped to lower costs, to make people healthier by earlier intervention and prevention, and that these insurers have said that even if the law was struck down that they would continue to implement these reforms/improvements. The people who really don’t want the law to exist are those of the Koch brothers’ mold, and those who just don’t want to pay anything at all for health coverage, but would accept free care if and when they need it.

Other than that, my guess was that the market would knee-jerk downward no matter which way the court decision went.

Jun 28, 2012 12:30pm EDT  --  Report as abuse
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