US stocks take a plunge on health care ruling

NEW YORK: US stocks fell yesterday after the US Supreme Court upheld the Obama administration’s health care overhaul law, while the euro hit a three-week low as divisions among European leaders at a meeting in Brussels further diminished hopes of urgent measures to tackle the region’s debt crisis.
The court upheld the centerpiece of President Barack Obama’s health care reform law that requires most Americans to get insurance by 2014 or pay a fine. Republican leaders and other opponents who claim the law is too costly and an over-reach of government power vowed to repeal it.
US health care sector stocks were generally weaker after the ruling, while stocks that stand to benefit from more government business rallied.
Financial shares took a beating after British bank Barclays plc paid record fines in a probe of its manipulation of interbank loan rates. A newspaper report saying US bank JPMorgan’s losses on recent botched trades could reach $9 billion hurt the banking sector.
Investors turned more cautious after data showed the US economy is losing momentum, while Germany’s unemployment rose in June, posing a risk for global growth.
Also weighing on investor sentiment was whether Obama and Congress will agree to extend tax cuts and unemployment benefits before year-end. Traders fear a failure to continue these measures could tip the United States into recession.
Analysts said that with the market so focused on the outcome of the European summit, trade in stocks and the euro would remain choppy, driven by headlines from the meeting.
European Union leaders will ask the bloc’s top four officials to develop the building blocks they have identified so far into a detailed, time-bound roadmap to a genuine economic and monetary union, draft conclusions of the EU leaders’ summit showed.
Nagging doubts over significant progress toward a crisis solution at the meeting pushed yields on 10-year Spanish bonds above 7 percent and 10-year Italian debt to 6.25 percent. These are seen as unsustainable borrowing costs for the euro zone’s third- and fourth-biggest economies.
Wall Street’s three major indexes were around 1 percent lower, led by losses in the banking and health care sectors.
In midday trade, the Dow Jones industrial average was down 131.12 points, or 1.04 percent, at 12,495.89. The Standard & Poor’s 500 Index was down 13.70 points, or 1.03 percent, at 1,318.15. The Nasdaq Composite Index was down 42.81 points, or 1.49 percent, at 2,832.51.
The S&P health care index was down 0.99 percent, while the Morgan Stanley health care payor index was last up 0.3 percent, rebounding from an earlier 1.0 percent drop shortly after the high court narrowly upheld the landmark law that requires most Americans to buy health care insurance.
Shares of large health insurers fell, with Wellpoint down 4.8 percent at $66.14, while Centene Corp. and Molina Healthcare, which specialize in Medicaid programs for the poor, rose 1.6 percent and 4.8 percent, respectively.
JPMorgan shares were down $1.72, or 4.7 percent, at $35.06 after the New York Times, citing people briefed on the situation, reported losses from a soured credit derivative trade could be as much as $9 billion after the US bank said in May it had lost $2 billion on the trade.
The FTS Eurofirst 300 index of top European company shares provisionally ended down 0.5 percent at 995.14 points. The STOXX European banking index closed down 2.36 percent.
Barclays stock shed 15.5 percent at 178.65 pence after the bank agreed to pay a $453 million fine for manipulating interest rates on the London interbank market.
MSCI’s world equity index fell 0.66 percent to 1,193.86.
The euro fell 0.35 percent to $1.2425 after touching a three-week low versus the dollar at $1.2405.
The dollar index was up 0.23 percent at 82.805 after touching its highest level in about 1-1/2 weeks.
The move to lower-risk investments fed bids for US Treasuries and German Bunds. Benchmark 10-year Treasury notes were up 14/32 in price at 101-19/32 to yield 1.57 percent, down nearly 5 basis points, while Bund futures were up 0.5 percent at 141.83. Anxiety about slowing global growth and the outcome of the EU summit stoked selling in oil and other commodities.
Gold fell more than 1 percent to its lowest level since June 1 at $1,549.99 an ounce. It last traded at $1,552.20.
Brent crude futures in London fell $1.57, or 1.68 percent, to $91.93 a barrel, while US oil futures dropped $1.99, or 2.48 percent, at $78.22 a barrel.