Wall Street’s main indexes experienced a tumultuous day of trading on Thursday, ultimately closing lower due to losses in healthcare stocks. Despite gains in Cisco and energy stocks, concerns over interest rates remaining higher for longer persisted, fueled by positive economic data. The decline in the S&P 500 was primarily driven by a significant drop in CVS Health shares after news emerged that Blue Shield of California plans to reduce its reliance on the company as its pharmacy benefit manager (PBM) and work with other providers, including Amazon.com. This development also impacted major health insurers UnitedHealth and Cigna, leading to a broader decline in the S&P 500 healthcare index. The S&P 500 closed 0.77% lower at 4,370.36, while the Nasdaq Composite dropped 1.07% to 13,330.88. The Dow Jones Industrial Average fell 0.84% to 34,474.83.
Wall Street Closes Lower as Healthcare Stocks Tumble
Wall Street’s main indexes closed lower on Thursday after a day of choppy trading. The losses in healthcare stocks outweighed gains in Cisco and energy stocks. The news that Blue Shield of California plans to cut its reliance on CVS Health as its pharmacy benefit manager (PBM) and work with others, including Amazon.com, caused CVS stock to tumble 8%. This news also affected other major health insurers UnitedHealth and Cigna, which saw drops of 1.9% and 6.4% respectively, leading to a 0.8% decline in the broader S&P 500 healthcare index.
The S&P 500 ended the day down 0.77% at 4,370.36, while the Nasdaq Composite dropped 1.07% to 13,330.88. This marked the S&P 500’s deepest three-session drop since mid-March and the Nasdaq’s deepest three-day drop since February. The Dow Jones Industrial Average fell 0.84% to 34,474.83.
While healthcare stocks experienced losses, energy stocks saw gains as higher oil prices lifted shares of Exxon Mobil and Chevron. The hope that China’s central bank would bolster the property market and wider economy contributed to the rise in commodities. However, the stock market was further pressured by the yield on 10-year U.S. Treasury notes hitting its highest level since October. This was a result of strong economic data raising concerns that the Federal Reserve could keep interest rates at the current level for longer.
Looking ahead, market analysts expect stocks to remain choppy until there is an increase in earnings or a decrease in yields. The recent weakness in the stock market can be attributed to robust U.S. economic growth, which suggests that the Fed is likely to embrace "high rates for longer." The majority of traders expect the Federal Reserve to keep rates unchanged in September, although bets of a pause have slipped slightly.
Despite the overall decline in the market, there were some positive performers. Cisco Systems gained 3.3% after reporting better-than-expected fourth-quarter results. Pfizer also rose 2.9% as the company announced that its updated COVID-19 shot showed neutralizing activity against the "Eris" subvariant in a study conducted on mice. Vaccine makers Moderna and Novavax also saw gains as U.S. data revealed a more than 40% increase in COVID-19-related hospitalizations from recent lows in June.
In summary, Wall Street closed lower on Thursday due to losses in healthcare stocks and concerns about interest rates remaining higher for longer. While some stocks experienced gains, the overall market was weighed down by the news of Blue Shield of California cutting its reliance on CVS Health. Investors will be closely watching for any changes in earnings and interest rates to guide future market movements.
Disclaimer: This article is for informational purposes only and should not be construed as financial advice.
