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Stock Market News for June 29, 2012

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Investors had few expectations of something definite emerging out of the European Summit and consequently benchmarks hovered in the red during the morning session. Also adding to the concerns was the Supreme Court’s ruling in support of President Barack Obama’s healthcare law. However, markets made came off the day’s losses in the final hour as news of a “growth pact” being concluded during the European Summit curbed the heavy losses to leave the benchmarks only somewhat lower.

The Dow Jones Industrial Average (DJI) slipped 0.2% and closed at 12,602.26. The Standard & Poor 500 (S&P 500) also edged 0.2% lower to finish yesterday’s trading session at 1,329.04. The tech-laden Nasdaq Composite Index dropped 0.9% and was lost 25.83 points to end at 2,849.49. The fear-gauge CBOE Volatility Index (VIX) moved 1.3% higher to settle at 19.71. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 6.69 billion shares, slightly lower than the daily average of 6.84 billion. Advancers moved past the declining stocks on the NYSE; as for 54% stocks that gained, 42% stocks closed lower.

A Supreme Court ruling that favored most parts of the Affordable Care Act of 2010 was the biggest headline on the home front yesterday. The news made its impact felt on the markets as insurers, medical companies and businesses weighed their individual pros and cons from the development. The ruling upheld the "individual mandate" that requires every U.S. individual to buy health insurance by 2014, failing which they will have to pay a penalty. According to many, the new mandate will add to the costs of businesses. Meanwhile, the law also significantly expands Medicaid to take into account an additional 17 million low-income people. Critics said businesses will have to bear the extra cost of paying the insurance amount for employees and a market expert opined that the additional burden is "not a way to get people off the fence to hire people".

Insurers will also have to provide insurance to people with serious diseases. Further, it is believed that insurers will now face higher taxes and more regulations. Detailing the main provisions a CNN money report opined that “insurers can't impose a maximum lifetime dollar limit on a customer's medical care”. Hospitals will definitely have more patients visiting, but people who had earlier opted out of medical treatment will now visit the hospitals with insurance policies in their pockets.

The extra burden comes at a time when the economy eagerly awaits decisions on spending and tax cuts. The new ruling is also the “biggest overhaul of the $2.6 trillion healthcare system in about 50 years”, Reuters noted. The ruling also set brings the political battle to the fore. Obama viewed it as “a victory for people all over this country whose lives will be more secure because of this law and the Supreme Court's decision to uphold it”. Meanwhile, Mitt Romney, the Republican’s presidential candidate, said: “If we want to get rid of Obamacare, we are going to have to replace President Obama. My mission is to make sure we do exactly that,” and added: “Repeal and Replace Obamacare".

Looking at the stocks of the health insurers, WellPoint, Inc. (NYSE:WLP), Aetna Inc. (NYSE:AET), CIGNA Corporation (NYSE:CI) and Health Net, Inc. (NYSE:HNT) slumped 5.2%, 2.7%, 2.7% and 2.3%, respectively. However, most of the stocks in the healthcare segment moved higher with HCA Holdings Inc (NYSE:HCA), Community Health Systems (NYSE:CYH), LifePoint Hospitals, Inc. (NASDAQ:LPNT) and Universal Health Services, Inc. (NYSE:UHS) jumping 10.8%, 8.0%, 5.5% and 8.5%, respectively.

Addiitonally, initial claims showed signs of decline. The U.S. Department of Labor reported a decline of 6,000 in seasonally adjusted initial claims in the week ending June 23 and its stands at 386,000, down from the previous week's revised figure of 392,000. Separately, the Bureau of Economic Analysis came out with its third" GDP estimate and reported that “Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.9 percent in the first quarter of 2012 (that is, from the fourth quarter to the first quarter)”.

However, investors were less focused on these economic readings as the Supreme Court ruling overshadowed other domestic events. Nonetheless, cross-Atlantic developments made its presence felt amidst the domestic headlines and reports of European leaders agreeing to a “growth pact” curbed a large chunk of the day’s losses. Herman Van Rompuy, President of EU, said the region’s leaders agreed to €120 billion worth of measures to boost failing economies. Rompuy said: "What we already agreed is ... to boost the financing of the economy by around 120 billion euros for immediate growth measures…There are two countries that are very keen to ensure there is agreement on long-term measures and short-term measures”.

European leaders are attending a key meeting in Brussels. Investors had less hope of a definite direction to evolve from the summit, as historically the meetings have failed to come up with any definite solution. However, with this development, investors’ sentiment got a boost and domestic markets recouped a chunk of its losses. It was in the last half-an-hour that benchmarks started swinging upwards, and the rebound was well reflected with the Dow curbing its losses by as much as 177 points to end just 25 points lower.

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