Insights

Health Care Stocks Strong On 60 Votes

The U.S. Senate advanced their health care package as the Democrats finally managed to get the needed 60 votes, sending health care stocks higher.  Health insurance company Aetna Inc. (NYSE: AET) added 4.70% (+$1.53, $34.04) as the Senate plan provides for 30 million new customers for the HMO’s without having them compete against a government option.  The health care plan passed by Congress included a government option, but as the Senate’s plan has moved forward without it, the HMO’s have been in rally mode.  Since December 4th, Aetna is up 17.5%, UnitedHealth Care Group Inc. (NYSE: UNH) is up 17.2%, Cigna Corp. (NYSE: CI) is up 15.6% and Wellpoint Inc. (NYSE: WLP) is up 11.4%.

The health care sector easily outdistanced the market as a whole as the Dow Jones Industrial Index only rose 0.82% (+85.25, 10,414.14).  The broader S&P 500 gained 1.05% (+11.58, 1,114.05) and the tech heavy Nasdaq 100 was up 1.18% (+21.43, 1,828.79).  The Nasdaq 100 closed at new 2009 highs today as it broke out of a six week trading range, showing the relative strength tech stocks have had recently.

Sanofi Aventis (NYSE: SNY), a $100+ billion pharmaceutical company, is buying Chattem, Inc. (NSDQ: CHTT) for $93.50 a share in an all-cash deal, causing the shares to rise 33%.  Chattem produces over the counter pain relievers, personal care items and dietary supplements.  The deal diversifies Sanofi away from prescription drugs and into the over the counter market as competition from generic manufacturers threatens some of the older drugs in their portfolio that have expiring patents.  The deal makes sense for Chattem as the stock price was up $23.16 (+33.09%, $93.14) a share today.

The news for health and drugs does not stop there are Walgreen Co. (NYSE: WAG) reported their first quarter profits rose by 20%.  The swine flu scare had customers lining up for vaccines as the drug store chain sold 5.4 million seasonal flu shots in the quarter.  This was a boon to drug stores as it got customers in the door and Walgreen stated that their prescription drug sales also improved.  In retail you have to get them in the store first and there is nothing like a health care scare to drive sales at a drug store that also hopes to sell you a magazine and a candy bar.  Walgreen beat by a penny ($0.49 vs. $0.48) but investors must have expected more as the stock dropped 3 cents today and Citigroup issued a sell rating on the stock.

The dollar rally continued as the index future spot price gained 29 cents (+0.37%, 78.06) and put pressure on oil and gold prices, while copper and steel scratched out small gains.  Nymex WTI crude was up earlier in the trading day on increasing hopes for an economic recovery, but was last seen trading down $1.05 a barrel (-1.41%, $73.37, 4:16 p.m.)   Steel and copper managed to hold onto their gains as they are also viewed as economically sensitive.  The Market Vectors Steel ETF (NYSE: SLX) rose 1.38% (+$0.83, $60.73) while the iPath Copper ETF (NYSE: JJC) was up 2 cents at $43.05.

The New York Spot Price for gold fell $21.60 an ounce on the strong dollar closing below $1,100.  The SPDR Gold Shares (NYSE: GLD) reversed early gains and lost $2.00 (-1.83%, $106.95), closing below its 50 day exponential moving average and slightly lower than the low set by the sell off last Thursday.  Lower lows are never a good sign.

Tomorrow starts the parade of economic releases we have this week with the ICSC-Goldman Store Sales at 7:45 a.m., GDP (2.7% expected) and Corporate Profits at 8:30 a.m., Redbook at 8:55 a.m., and Existing Home Sales (6.25 million) and the FHFA House Price Index at 10 a.m.

We have a shortened trading week this week, with the markets being closed on Friday in observance of Christmas.