What happened
Several medical device stocks are soaring today as investors anticipate that the U.S. Congress will pass a stimulus bill to boost the economy during the crisis caused by the coronavirus pandemic. Shares of Align Technology (ALGN +3.11%) were up 11% as of 11:38 a.m. EDT on Tuesday. Insulet (PODD +0.88%) stock was climbing 8.9% higher. Shares of Intuitive Surgical (ISRG +1.82%) were jumping 14.9%.
So what
After political wrangling through the weekend and into early this week, lawmakers appear to be getting close to striking a deal, with Treasury Secretary Steve Mnuchin participating in some of the discussions. Both Democrats and Republicans involved in the negotiations over the stimulus package sounded confident that a bill that could pass both the House and the Senate would be agreed upon soon. The price tag of the bill is expected to be around $2 trillion.
Image source: Getty Images.
What does this really mean for Align, Insulet, and Intuitive Surgical? It's uncertain that any of the three companies will be direct recipients of any stimulus to emerge from discussions on Capitol Hill.
However, hospitals could receive federal money, which could indirectly help Intuitive Surgical, which sells and leases robotic surgical systems to hospitals. It's also possible that money given directly to individuals could indirectly benefit Align, which sells clear dental aligners, and Insulet, which markets an insulin management system. Still, though, any financial impact for the companies is likely to be relatively small.
The main reason that these medical device stocks were jumping on Tuesday is that the potential of massive federal spending provides hope that the U.S. economy will bounce back sooner rather than later from the coronavirus pandemic. Investors are eager to have any reason for optimism, and the stimulus bill could provide one.
Now what
Today's big stock moves could prove to be only temporary euphoria. Expect high volatility for Align Technology, Insulet, Intuitive Surgical, and other healthcare stocks to continue for weeks and potentially even months. But decisive federal action could reduce the economic impact of the coronavirus outbreak. That would be good news for all stocks, even for companies that don't receive financial assistance themselves.
