MarketView for March 22

Summary 

If there is one thing that the financial markets dislike, it is uncertainty and on Monday the uncertainty regarding the healthcare bill in Congress was over sending share prices higher and the major equity indexes into positive territory. After initially trading lower, the Dow Jones industrial average rebounded to finish at a 17-month high and its ninth gain in 10 sessions.

Although there were some concerns over whether the bill, approved on Sunday would hurt profits within the industry, for all practical purposes this was already priced into share prices. For example, among the pharmaceutical companies, Pfizer added 1.4 percent to close at $17.15 while Merck & was up 0.6 percent to close at $38.30. Both companies are Dow components.

Insurance companies were mixed, with WellPoint down 1.1 percent to $64.39 and Aetna up 0.5 percent, closing at $34.64. Molina Healthcare, which stands to gain from the extension of Medicaid benefits, rose 3.6 percent to $25.33.

Among the large cap stocks, Boeing ended the day up 1.9 percent, closing at $72.04 after Barclays raised its price target on the plane manufacturer. Large cap tech stocks sent the Nasdaq to its highest close since August 2008. Oracle ended the day up 1.8 percent to close at $25.65. The business software maker is scheduled to report results later this week. Apple ended the day up 1.2 percent, closing at $224.87

Google edged 0.4 percent lower to $557.95. Earlier it said visitors to its China search engine are being redirected to the Hong Kong-based engine following unsuccessful talks with the Chinese government about operating an uncensored search engine in the country.

Surprisingly, Tiffany reported a fourth-quarter profit that was weaker than expected but gave a full-year profit view that was above consensus. The stock fell 0.3 percent to close at $47.41.

Health Care Bill Does Not Daunt Interest

Shares of Medicaid insurers, hospital companies and even drug manufacturers rose on Monday as Wall Street began to realize that that passage of the landmark healthcare legislation will add millions of new paying patients.

Shares of hospital companies, such as Community Health Systems and health insurers such as Amerigroup that focus on Medicaid plans for the poor, led the rise as the reform package extends coverage to 32 million Americans.

The overhaul will expand the Medicaid government health plan for the poor and bar insurance practices such as refusing to cover people with pre-existing medical conditions.

Shares of health insurers, the prime target of reformers during the lengthy debate rose as uncertainty was cleared from the market in that they had avoided a worst-case scenario, specifically the creation of a government-run competitor. Meanwhile, the large insurers, such as WellPoint and UnitedHealth Group shed early gains, while Medicaid-focused insurers such as Amerigroup and Molina Healthcare climbed sharply because they stand to benefit from an expansion of the program. Molina shares were up 5 percent.

However, the cost of protecting health insurers' debt with credit default swaps rose.Five-year credit default swaps on Aetna rose to 110.5 basis points from 97.5 basis points at Friday's close, while Cigna Corp's (CI.N) credit default swaps rose to 120 basis points from 110 basis points on Friday, according to data from CMA DataVision.

Shares of hospital companies were higher. For example, Community Health Systems and Tenet Healthcare rose 4 percent and 7.7 percent, respectively. The overhaul has been seen as helping hospital companies by adding more insured customers, thereby decreasing the numbers of patients who used services without being able to pay for them.

Drug companies face new fees, but wider insurance coverage could help offset the costs by delivering new customers willing to fill costly prescriptions. Medtronic and Boston Scientific also face an industry tax, but it was cut in half to $20 billion and will not start until 2013.