Stocks fall as fears of budget proposal impact hit health care stocks
NEW YORK -- Health care stocks, one of the better performers on Wall Street lately, led the market lower Thursday after the White House proposed cutting payments to private insurance plans.
The Obama administration's $3.55 trillion budget plan for 2010 includes cuts to Medicare, and private health insurance plans serving Medicare seniors would take the biggest hit. As investors became aware of the impact the budget, if enacted, could have on the companies, they turned against what had been one of the strongest industries in the stock market recently.
Banking shares initially pulled much of the market higher as investors welcomed plans from Washington for additional bailout measures that could provide up to $750 billion in support to the struggling banking system. But the Obama administration said the money was for a contingency fund and that it didn't plan to immediately ask Congress to add to the government's existing $700 billion rescue program.
The market's gyrations extended a back-and-forth pattern that began earlier in the week. Market watchers say the sudden shifts reflect indecision among investors rather than big changes in their sentiment over the economy.
"I don't think anybody is comfortable if you're in the market right now. You still have quite a bit of fear driving equity prices," said Bill Knapp, investment strategist for MainStay Investments, a division of New York Life Investment Management.
The Dow Jones industrial average fell 88.81, or 1.2%, to 7,182.08. The Standard & Poor's 500 index fell 12.07, or 1.6%, to 752.83 and the Nasdaq composite index fell 33.96, or 2.4%, to 1,391.47.
The Russell 2000 index of smaller companies fell 8.49, or 2.1%, to 392.95.
Declining issues outnumbered advancers by about 8 to 7 on the New York Stock Exchange, where volume came to a light 1.49 billion shares.
Stocks ended a bumpy session down 1% Wednesday. The government addressed some questions about banks by confirming it will buy preferred shares from banks that can be converted into common shares, and repeated its position that it does not plan to nationalize banks.
