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Why CVS Health Stock Soared Today

By Keith Speights - Mar 17, 2020 at 3:22PM

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Investors are excited about a potential huge federal stimulus package.

What happened

Shares of CVS Health (CVS -1.42%) were soaring 11.8% higher as of 3 p.m. EDT on Tuesday after sinking yesterday. The big jump came on reports that the Trump administration is considering a stimulus package totaling close to $1 trillion to help boost the economy in the midst of the coronavirus pandemic.

So what

Investors are viewing the prospects of a major federal action to help individuals and businesses recover from the impact of the coronavirus outbreak as very good news. Any program that helps reduce unemployment caused by the COVID-19 worries and puts more money in the hands of consumers would likely provide some benefit to retailers, including CVS Health.

CVS pharmacy store

Image source: CVS Health.

But, as usual, the devil is in the details. It remains unknown at this point what the potential federal stimulus package will include. And the contents of any major spending bill will influence how much political support it receives.

Some of CVS Health's business will be negatively impacted by the pandemic. For example, the company's retail stores could experience significantly lower customer traffic as people stay home to practice the social distancing recommended by health experts. CVS' Aetna health insurance business could be affected by higher medical costs if the number of COVID-19 cases is especially severe. On the other hand, CVS Health's prescription drug sales and pharmacy benefits management (PBM) are less likely to be affected in a major way by the coronavirus outbreak.

Now what

Healthcare stocks, including CVS Health, are likely to remain very volatile over the next few weeks and possibly over the next several months. A lot rides on how bad the COVID-19 outbreak is in the U.S. and what the federal government ultimately does to help spur a recovery. 

Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.

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$104.92 (-1.42%) $-1.51

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