Why Health Care Crushed the Dow

While the markets opened on a sour note, they slowly gained momentum all day to top off the best weekly gain of 2012.

Despite yesterday's disappointment that Federal Reserve Chairman Ben Bernanke wouldn't commit to further monetary action, today's reports that Spain will seek relief for its beleaguered banking sector helped. If the eurozone allows its estimated $50 billion request of funds from the European Financial Stability Facility, it would go a long way toward shoring up the nation's asset bases. It's not an outright solution, but at least it should kick the can down the road for a while, buying time for further recovery to help grow Spain out of its problems. Unsurprisingly, Banco Santander (NYSE: STD  ) investors reacted favorably to the news, sending shares up nearly 3%.

That said, let's see where the three major indexes closed and take a closer look at today's best-performing sector (hint: it was health care).

Index

Gain / Loss

Gain / Loss %

Ending Value

Dow Jones Industrial Average (INDEX: ^DJI  ) 93.24 0.75% 12,554.20
Nasdaq 27.40 0.97% 2,858.42
S&P 500 10.67 0.81% 1,325.66

Source: Yahoo! Finance.

It was fitting the Nasdaq had the best performance, up nearly 1%, as it closed out the week with an impressive 4% gain. The S&P 500 saw a 3.7% weekly increase while the Dow finished up a mere 3.6%. If only it lagged like that every week! All those gains have calmed investor worries as the market's fear gauge, the VIX (INDEX: VIX  ) , declined every day this week and dropped another 2% during today's session.

As I mentioned, health care has quietly been the best-performing sector of the market over the past six months, and it added to that lead with a 1.3% gain on the day. Notable risers included Pharmacyclics (Nasdaq: PCYC  ) , which saw shares increase another 7% today, putting it up 29% for the week. Management believes in the company, as seen by recent insider buying, but perhaps more importantly, so does Dow component Johnson & Johnson (NYSE: JNJ  ) , which is on the hook for nearly $1 billion if lymphoma/leukemia treatment ibrutinib hits all its milestones. Of course, that will be a drop in the bucket if the drug is successful, as some predictions have its annual sales over $2 billion. This is definitely a stock to watch.

The best approach
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David Williamson owns shares of Johnson & Johnson, but he holds no other position in any company mentioned. Check out his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Johnson & Johnson and creating a diagonal call position in Johnson & Johnson. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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