Health Care Leads the Dow Jones Higher Today

After a federal appeals court declared Obamacare subsidies on federal exchanges to be illegal, the health care sector is gaining, as many believe the decision will be overturned.

Jul 22, 2014 at 1:32PM
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Health care and technology stocks are leading the stock market and the Dow Jones Industrial Average (DJINDICES:^DJI) up today following positive reports on the housing market and inflation. As of 1:20 p.m. EDT the Dow was up 73 points to 17,125. The S&P 500 (SNPINDEX:^GSPC) was up 12 points to 1,985.

There were two U.S. economic releases today.

Report

Period

Result

Previous

Consumer Price Index Inflation Rate

June

2.1%

2.1%

Core CPI

June

1.9%

2%

Existing Home Sales

June

5.04 million

4.9 million

The one to pay attention is the National Association of Realtor's existing-home sales report. The NAR reported that home sales picked up in June to a seasonally adjusted annual rate of 5.04 million. That's better than May's 4.9 million and analyst expectations of 4.97 million, but it's down 2.3% from 5.16 million in June 2013.

US Existing Home Sales Chart

US Existing Home Sales data by YCharts.

NAR chief economist Lawrence Yun dug deeper into the housing market, saying: "Inventories are at their highest level in over a year and price gains have slowed to much more welcoming levels in many parts of the country. This bodes well for rising home sales in the upcoming months as consumers are provided with more choices."

He went on to add some good news for homebuilders: "On the contrary, new home construction needs to rise by at least 50 percent for a complete return to a balanced market because supply shortages -- particularly in the West -- are still putting upward pressure on prices."

Homebuilder stocks, as represented by the SPDR S&P Homebuilders ETF (NYSEMKT:XHB), are up 1.5% today.

Home sales were a key strong point of the economy in 2013, but they have since lagged in 2014 as higher interest rates, coupled with high home prices around the U.S., have caused the market to stagnate. If home sales continue to improve, the rest of the economy should see a boost, as higher home sales correlate with increased consumer spending.

All sectors of the stock market are up today, with health care and technology leading the way.

G

Source: Finviz.com.

Among Dow stocks, the leader today is UnitedHealth Group (NYSE:UNH). Last week UnitedHealth reported earnings that beat analyst expectations and pulled the rest of the sector higher. Besides the company's massive size, one thing that sets it apart from its competitors is its decision not to get involved with the Obamacare exchanges. UnitedHealth is currently involved with only four state exchanges, but it has since said that would be increased next year. UnitedHealth may be reconsidering that after a federal appeals court ruled today that Affordable Care Act subsidies on federal exchanges were illegal.

However, the health care sector is broadly higher today, as many believe the ruling will be overturned, and just two hours after the decision, a separate appeals court upheld the ACA's federal-exchange subsidies. This issue a big deal, as 36 states currently use the federal exchange instead of setting up their own. Also, 87% of people who signed up so far this year received subsidies. After the ruling, the Obama administration immediately announced that it will appeal. Given a split federal court system, this issue will likely make it to the Supreme Court.

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Dan Dzombak has no position in any stocks mentioned. The Motley Fool recommends UnitedHealth Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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