Health stocks lift market on hopes Massachusetts vote will weaken Democrats' power in Senate

Tuesday, 19 January 2010 12:53

Written by Aman Bansil

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NEW YORK (AP) -- Investors moved back into stocks on hopes that a special election in Massachusetts will take away power from Senate Democrats and make it harder for President Barack Obama to make changes to health care. The vote Tuesday to fill the seat of late Sen. Edward M. Kennedy could shift power in the Senate if Republican Scott Brown wins. That would give Republicans the 41 votes necessary to block Democratic proposals, including the health care bill. The prospect of a logjam in Washington over health care eased concerns that profits at companies like insurers and drug makers would suffer. Rising health stocks pulled the broader market higher. The Dow Jones industrial average rose about 100 points after falling 100 on Friday. Broader indexes also rose and demand for the safety of government debt waned. Meanwhile, Kraft Foods Inc.'s agreement to acquire Cadbury PLC for $18.9 billion boosted hopes that corporate dealmaking will continue to rebound. Investors see buyouts as a sign of confidence in the economy. Technology stocks got a boost after a Credit Suisse analyst raised his rating on Ciena Corp., a maker of telecommunications equipment, predicting that revenue would exceed expectations. The gains came after stocks fell Friday when JPMorgan Chase & Co.'s quarterly results fell short of expectations. U.S. markets were closed Monday for Martin Luther King Jr. Day. Analysts said that beyond a possible shift in plans for health care, the week's earnings reports will help chart the market's course in the coming months as companies update their expectations for the economy. The stock market has been climbing for 10 months on hopes that an easing recession would boost corporate profits. But lingering problems like high unemployment and a weak housing market have raised questions about whether the jump in stocks is premature. "This is just a critical period when we get to see the litmus test of earnings and then guidance," said Philip S. Dow, managing director of equity strategy at RBC Wealth Management in Minneapolis. In midafternoon trading, the Dow rose 103.69, or 1 percent, to 10,713.34. The broader Standard & Poor's 500 index rose 11.88, or 1.1 percent, to 1,147.91, and the Nasdaq composite index rose 29.18, or 1.3 percent, to 2,317.17. Brett Hryb, a portfolio manager with MFC Global Investment Management in Toronto, said a defeat of the health bill could help some companies but that a win by Brown would not necessarily make that certain. "It's not a slam dunk by any means," he said. Among health stocks, insurers Aetna Inc. rose $1.29, or 4.1 percent, to $32.65 and UnitedHealth Group Inc. rose $1.17, or 3.5 percent, to $34.92. Pharmaceutical company Pfizer Inc. rose 43 cents, or 2.2 percent, to $19.92. Shares of Cadbury rose $3.09, or 6 percent, to $54.99. Kraft fell 32 cents, or 1.1 percent, to $29.26. Ciena rose $1.20, or 10.3 percent, to $12.83. Citigroup Inc. rose 10 cents, or 2.9 percent, to $3.52 after reporting a fourth-quarter loss of $7.6 billion mostly tied to repayment of $20 billion in government bailout money. The company said it is starting to see some stabilizing in the number of mortgage and credit card loans that are past due. Earnings reports are due this week from Bank of America Corp., eBay Inc., General Electric Co., Goldman Sachs Group Inc., Google Inc., Morgan Stanley and Wells Fargo & Co. International Business Machines Corp. reports after the closing bell Tuesday. Analysts said investors are hunting for clues about whether the market will continue its run in 2010 or begin to sputter if the economy doesn't show more signs it is strengthening. "Everybody is looking for that catalyst that is going to take us higher," said Anthony Conroy, managing director and head trader for BNY ConvergEx Group. He contends that the market will find strength from companies that surprise investors by reporting stronger profits. But Hryb said the run in stocks since March has left stocks with rich valuations and that even with big earnings stocks could be getting pricey. "It is a tug-of-war between the growth in the earnings and what people are willing to pay for those earnings," Hryb said. Bond prices fell, pushing their yields higher. The yield on the benchmark 10-year Treasury note rose to 3.71 percent from 3.68 percent late Friday. The dollar mostly rose against other major currencies. Gold advanced, while crude oil rose 65 cents to $78.65 per barrel on the New York Mercantile Exchange. More than two stocks rose for every one that fell at the New York Stock Exchange, where volume came to 590.4 million shares, compared with 864.1 million traded at the same point Friday. Volume was heavy Friday in part because of the expiration of options contracts. The Russell 2000 index of smaller companies rose 8.61, or 1.4 percent, to 644.64. Britain's FTSE 100 rose 0.3 percent, Germany's DAX index rose 1 percent, and France's CAC-40 rose 0.8 percent. Japan's Nikkei stock average fell 0.8 percent. Augstums reported from Charlotte, N.C.

By Tim Paradis and Ieva M. Augstums, AP Business Writers , On Tuesday January 19, 2010, 2:30 pm EST

Source: http://finance.yahoo.com