How Health Care Sank the Dow Today


After taking a break from pessimism for a week or so, investors are getting impatient. Continuing negotiations to come up with a package of spending cuts and tax increases, which are acceptable to both parties in Washington, remain at a standstill, and even though jobless claims have retreated to pre-Hurricane Sandy levels and beyond, investors will likely remain nervous until some resolution to the fiscal cliff comes. The Dow Jones Industrials fell 75 points.

Two major health-care stocks helped pull the Dow lower. Merck led the Dow's losers with a 2% drop, after CEO Ken Frazier issued a warning about how drug price controls could lead to reduced investment in research and development, in turn, slowing the pace of innovation and allowing potentially curable diseases to remain uncured. With many fiscal reforms centered on health-care costs, Merck is right to be concerned about its future.

Elsewhere in health care, UnitedHealth Group dropped 1.6%. A group of Republican senators asked for an extension of time before rules governing health-insurance exchanges under the Affordable Care Act take effect. The senators argue that a 30-day comment period wasn't enough to get useful responses. The upshot for UnitedHealth, though, is that without regulations, insurance companies may have to wait until guidance is in place before they can reap the rewards of more customers signing up for coverage.

Finally, Boeing fell 1.5%, as yet another 787 Dreamliner problem arose. This time, Qatar Airways chose to stop using one of its new aircraft, after finding the same problem that a United Continental plane suffered recently. The coincidence of the problems points to a possible manufacturing problem that could put another black eye on the Dreamliner program and do serious damage to Boeing's reputation.

Will health care stay healthy?
The Affordable Care Act is just one element of what's ailing health-care stocks lately. Uncertainty on a number of measures has hit the health insurance industry hard. At the Fool, we're cutting through that uncertainty with our new in-depth research report on UnitedHealth, taking the long-term view, and honing in on prospects for UnitedHealth in a post-Obamacare world. The report also comes with a full year of analyst updates to keep you covered as key news develops, so don't miss out -- simply click here now to claim your copy today.

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