NEW YORK — This time, health-care stocks bore the brunt of investors’ wrath.
Health insurers and drug companies, some of the better performers on Wall Street lately, led the market lower Thursday after the White House proposed cutting payments to private insurance plans.
The Obama administration’s $3.55 trillion budget plan for 2010 includes cuts to Medicare and Medicaid. Private insurance plans serving Medicare seniors would take the biggest hit, but hospitals, drug manufacturers and home health agencies also face cuts.
As investors became aware of the impact that the budget, if enacted, could have on the companies, they turned against what had been one of the strongest industries in the stock market recently.
The Dow Jones industrial average fell 88.81, or 1.2 percent to 7,182.08, pulled down by stocks including drugmaker Merck, down $1.87 at $26.04, and health-products company Johnson & Johnson, off $1.52 at $52.44.
The Standard & Poor’s 500 index fell 12.07, or 1.6 percent, to 752.83, and the Nasdaq composite fell 33.96, or 2.4 percent, to 1,391.47.
Market watchers had been looking to health care to help lead the market’s recovery along with other recession-resistant industries such as consumer staples.
Banking shares initially pulled much of the market higher as investors welcomed plans from Washington for additional bailout measures that could provide up to $750 billion in support to the struggling banking system. But the Obama administration said the money was for a contingency fund and that it didn’t plan to immediately ask Congress to add to the government’s existing $700 billion rescue program. Many financial stocks managed to close the day higher.
The day’s gyrations showed how fractious the market is, with investors ready to turn on stocks at the first whiff of bad news.
Wall Street also extended a back-and-forth pattern that began earlier in the week. Market watchers say the sudden shifts reflect indecision among investors rather than big changes in their sentiment over the economy.
“I don’t think anybody is comfortable if you’re in the market right now. You still have quite a bit of fear driving equity prices,” said Bill Knapp, investment strategist for MainStay Investments, a division of New York Life Investment Management.
The major stock indexes gave up early leads to close lower.
