The major market averages are holding session highs with the Dow Industrials (INDU) 8,848 holding a 43 points gain, while the S&P 500 Index (SPX.X) 934 and NASDAQ Composite (COMPX) 1,428 post 4- point and 14-point respective gains.
Some positive economic news from October existing home sales, which rose an unexpected 6.1% to a seasonally adjusted annual rate of 5.77 million units have pushed stocks to their morning highs. October's 5.77 million annual rate showed growth compared to September's 5.44 million (revised up from 5.40 million). October's 6.1% gain was the third highest level ever and found the median price of an existing home's price rising 9.8% year over year to $159,600. Economists were expecting existing home sales to be steady at 5.42 million.
The stronger than expected existing home sales numbers have given a marginal boost to the Dow Jones Home Construction Index (DJUSBH) 310 +0.98%, which tends to be impacted more by new home sales. Tomorrow at 10:00 AM EST, October new home sales data will be released, with economist's looking for 980,000 compared to September's preliminary 1.021M.
The HMO Index (HMO.X) 459.44 -8.87% and the Morgan Stanley Health Provider Index (RXH.X) 271 -3.3% are under selling pressure once again after multiple downgrades in the HMO sector from SG Cowen. The firm said it would be reducing its managed care investment rating to "market perform" from "strong buy" on the results of their 2003 pricing survey, which indicated that 2003 will most likely be more challenging that previously thought with less opportunity for earnings per share upside. SG Cowen downgraded Wellpoint Health Network (NYSE:WLP) $64 -8.45%, Health Net Inc. (NYSE:HNT) $23.47 -10.79%, United Health (NYSE:UNH) $76.94 -9% and Humana Inc. (NYSE:HUM) $10.07, which breaks to a 52-week low.
SG Cowen also reduced ratings on Cigna (NYSE:CI) $40.44 -2.67% (which gapped lower from the $65 level on October 25th after issuing 2003 guidance significantly below consensus) and Aetna (NYSE:AET) $36.94 -7.99% to "underperform" from "market perform."
On Thursday of last week (market monitor 12:03:04, shares of United Health (NYSE:UNH) were falling after the company had reaffirmed guidance for full year 2002, but Goldman Sachs own comment that pricing may have peaked in the group, brought some renewed selling in the HMO's. Despite the negative reaction to Goldman's own comments, the firm (Goldman) came with a perplexing bullish note saying that any lack of further pricing benefits for the group might be a "positive" for the industry group as the government might not have to step in an mandate price caps or cuts.
Friday's and then today's selling in the group looks to have investors more concerned with margin erosion or lack of top and bottom line growth, REGARDLESS of what the government does regarding thoughts on price caps.