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Wall Street issues instant verdicts on health care stocks

Updated: July 30, 2012 6:32AM

Wall Street engaged in a favorite pastime Thursday after the U.S. Supreme Court ruled on the health care law: It separated winners from losers.

But investors’ verdict was hasty and analysts said it probably will be revised multiple times, especially through the November presidential election.

Shares of hospital chains rose sharply on the ruling because health-care reform promises more customers and guaranteed payment.

“The initial reaction is that it was good for the hospitals, but bad for the managed-care companies because they’re the ones paying for it,” said Jack Ablin, chief investment officer at Harris Private Bank.

Large insurers who provide policies through workplaces saw their stocks decline in the ruling’s wake, although they made up some of the lost ground by the end of the session.

Results were mixed for medical device makers, which could get increased demand for their products but also are singled out under the health care act for a 2.3 percent tax, a provision the Supreme Court let stand.

HCA Holdings Inc., the owner of the largest private hospital chain in the country, saw its shares gain 10.75 percent Thursday. Community Health Systems rose 8.9 percent and Universal Health Services Inc. rose 8.5 percent.

Among insurers, WellPoint Inc. lost 5.2 percent because its business is drawn from individuals and small groups. UnitedHealth Group Inc. closed higher by a half-point after initially falling 7 percent.

It was a matter of parsing out details of the court’s ruling and applying them to specific cases. UnitedHealth rebounded from the early selling because it is diversified, with a pharmacy benefits and Medicare business.

Expect a lot of re-evaluations in the health-care sector, advised William Hummer, chief economist at Wayne Hummer Investments. He said sentiment about specific companies could turn quickly.

“The reaction to the ruling was not as negative as it could have been,” Hummer said. “There’s a strong feeling that the story has not ended yet.”

Mitt Romney, President Barack Obama’s Republican opponent in November, has promised to ask Congress to repeal the health care law as soon as he takes office. Any sign that Romney is gaining in the polls could scramble the calculations investors apply to health care.

The Affordable Care Act, the subject of the Supreme Court ruling, was enacted in March 2010. Since then, shares of hospital companies have been down, then up while those of insurers have rallied.

The broader market ended Thursday with only minor losses after the indexes tumbled in the morning by more than 1 percent. The Dow Jones industrial average, at one point down 177 points, closed off just 24.75 points to 12,602.26.

The Standards & Poor’s 500 index lost 2.91 to close at 1,329.04 and the Nasdaq composite index fell 25.83 points to 2,849.49.

Some traders were following events overseas, including a summit of European leaders that fed rumors of a pending interest rate cut by the European Central Bank.

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