Stocks swoon, then mostly recover after healthcare bill is pulled

U.S. stocks flirted with sharp losses but managed a mixed finish after Republicans canceled a vote on their healthcare bill because it became clear the bill would fail. Investors didn’t trade much as they waited for answers about the state of President Trump’s business-friendly agenda.

For the second day in a row, stocks started higher and wilted as it became clear the healthcare bill was in trouble. The Dow Jones industrial average plunged as much as 126 points in afternoon trading on reports of the bill’s impending failure, although Wall Street cut its losses after the vote was canceled. Consumer-focused companies such as Nike, Starbucks and clothing company PVH rose.

The healthcare act became something of a proxy for the rest of the Trump agenda, and it dominated the market for most of this week. It was the worst week for stocks since the week before the presidential election. Banks and small-company stocks, which made huge gains after Trump was elected, both suffered their biggest losses in more than a year.

Trump and other Republican leaders said they were moving on from healthcare, and Michael Scanlon, a portfolio manager for Manulife Asset Management, said investors will be glad if that happens.

“You’re going to see a very quick pivot to corporate tax reform,” he said. A corporate tax cut could give stocks a large boost by increasing profits, and it might also raise tax revenue. After the close of trading, House Speaker Paul Ryan said Republicans will proceed with tax reform proposals, but he acknowledged the healthcare debacle will make that task more difficult.

The Standard & Poor’s 500 index finished down 1.98 points, or 0.1%, at 2,343.98. The Dow fell 59.86 points, or 0.3%, to 20,596.72 as Goldman Sachs and Boeing sank. Technology companies inched higher, and the Nasdaq composite rose 11.04 points, or 0.2%, to 5,828.74. The Russell 2000 index of smaller-company stocks rose 1.22 points, or 0.1%, to 1,354.64.

Trading was relatively quiet, which may have contributed to the big fluctuations.

Hospitals and insurers that do a lot of business with Medicaid celebrated the demise of the bill. HCA Holdings, the largest U.S. hospital company, climbed 3.5% to $86.04, and Community Health Systems jumped 9.7% to $9.54. Among Medicaid-focused companies, Molina Healthcare went up 4.6% to $44.68, and Centene advanced 5.2% to $68.73.

The American Health Care Act probably would have left more Americans uninsured and would have made big changes to Medicaid, a joint federal-state health program for low-income Americans. When the bill was introduced, those stocks fell because investors were worried that hospitals would have to take in more patients who lack insurance and that insurers would get less money from Medicaid.

With the 2010 Affordable Care Act — also called Obamacare — alive for another day, insurance companies slumped. Cigna fell 2.3% to $142.82, and Anthem fell 1.6% to $126.77.

With Trump and majority Republicans unable to pass the first big item on their agenda, there were some signs of concern that his proposals of tax cuts, infrastructure spending and regulatory cuts will take longer. Those are aspects of Trump’s proposed agenda about which Wall Street is excited.

Vulcan Materials, a construction materials maker, sank 2.3% to $112.74. Steel maker Nucor declined 2.4% to $59.76. Construction and machinery companies also stumbled. Engine maker Cummins fell 1% to $150.77, and Boeing slipped 0.8% to $175.82.

Scanlon said investors want Trump and Congress to come up with a real proposal that changes corporate taxes.

“Something needs to be done with a permanent solution, not just one of these holiday things,” he said, because “the goal is to be a stimulus for domestic investment.”

SeaWorld Entertainment climbed 4.7% to $18.13 after a Chinese real estate holding company bought Blackstone Group’s 21% stake in the theme-park chain. SeaWorld said Zhonghong Group would buy the stock at $23 a share.

Micron Technology jumped 7.4% to $28.43 after the chipmaker posted a much bigger quarterly profit than analysts expected.

GameStop sank 13.6% to $20.70 after the video game retailer reported weak sales, saying consumers were waiting for new gaming systems to reach the market.

Finish Line dived 19.5% to $12.93 after the shoe store chain said it had to cut prices in response to weak sales, and lowered its profit estimate.

Companies that make and sell household goods lagged behind the rest of the market.

Bond prices rose slightly. The yield on the 10-year Treasury note fell to 2.41% from 2.42%.

U.S. crude oil futures rose 27 cents to $47.97 a barrel. Brent crude, used to price international oils, rose 24 cents to $50.80 a barrel.

Wholesale gasoline rose 2 cents to $1.60 a gallon. Heating oil rose 1 cent to $1.50 a gallon. Natural gas rose 3 cents to $3.08 per 1,000 cubic feet.

The dollar inched down to 110.80 yen from 111.07 yen. The euro edged up to $1.0808 from $1.0786.

Gold rose $1.30 to $1,248.50 an ounce. Silver jumped 16 cents to $17.75 an ounce. Copper fell 1 cent to $2.63 a pound.

Germany’s DAX rose 0.2%, the French CAC 40 fell 0.2% and Britain’s FTSE 100 index slipped 0.1%. Japan’s benchmark Nikkei 225 index rose 0.9% after recent losses. The Kospi of South Korea shed 0.2%, while Hong Kong’s Hang Seng reversed earlier losses, finishing up 0.1%.

ALSO

Heed these three lessons, millennial Snap investors

Blackstone sells its 21% stake in SeaWorld to a Chinese firm

Whatever you do, don’t say yes when this chatbot asks, ‘Can you hear me?’

UPDATES:

2:25 p.m.: This article was updated with closing prices, context and analyst comment.

1:25 p.m.: This article was updated with the close of markets.

8:55 a.m.: This article was updated with market prices and context.

This article was originally published at 7:05 a.m.