Stock market update: Dow futures drop more than 100 points amidst ongoing stagnation

Stock market update: Dow futures drop more than 100 points amidst ongoing stagnation

U.S. stocks were poised for losses on Tuesday, signaling another day of slump as health insurers fell and investors faced the possibility that an interest rate cut could come later than expected.

Dow Jones Industrial Average Futures (^DJI) slipped 0.4%, or 160 points, bringing the blue-chip index to a bid to reach the key 40,000 level. S&P500 (^GSPC) futures contracts lost 0.3%, while contracts on the technology-heavy Nasdaq 100 (^NDX) fell by 0.4%.

US bonds continued to struggle, while the yield on the benchmark 10-year Treasury index (^TNX) stands at around 4.36%, approaching its 2024 highs.

The shares made a poor start in the second quarter after accumulating a chain of records in the early months of 2024. Warmer-than-expected manufacturing numbers gave weight to growing doubts about whether the Federal Reserve will cut rates in the first half as the The American economy is showing surprising resilience.

An update on job openings data later Tuesday should provide food for thought in the countdown to Friday’s jobs report, a key element in the Fed’s decision-making. The market will also listen to comments from Fed officials Michelle Bowman, Loretta Mester and Mary Daly on whether its inflation problem could derail the three planned rate cuts.

A decline in health insurer stocks weighed on markets early Tuesday, after U.S. regulators surprised the sector by failing to increase payments for private Medicare plans, as usual. Human (HUM) shares fell about 9%, while CVS (CVS) lost almost 6%.

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  • Health insurance stock tank

    Health insurance stocks are sent to their sick beds on Tuesday.

    Human (HUM) is drilled to the tune of 9% before commercialization, pressures also being observed on UnitedHealth Group (A H) and Cigna (THIS). The selloff comes as U.S. regulators have failed to raise payments for Medicare Advantage plans in line with Wall Street estimates.

    Payments will increase by 3.7% on average in 2025, a decrease of around 0.2% year-on-year.

    Lisa Gill, a longtime health care analyst at JP Morgan, said in a client note that came as a “surprise” because many on the Street were expecting an increase “given the environment of ‘use”.

    Humana is considered most exposed to the decision by the Centers for Medicare and Medicaid Services.

    Key call from Humana latest annual report:

    “As of December 31, 2023, we provided health insurance coverage under CMS contracts to approximately 5,408,900 individual Medicare Advantage members, including approximately 851,300 members in Florida. These Florida contracts represented approximately $14.9 billion in premium revenue, which represented approximately 19% of our individual revenues. Medicare Advantage premium revenue, representing 14% of our consolidated premium and service revenue for the year ended December 31, 2023.”

    RBC analyst Ben Hendrix said in a note this morning that Humana’s earnings forecast will need to be reset following the decision and the stock could remain under pressure. Conversely, Hendrix recommends clients buy Cigna stock in a downturn.

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