Why the Dow Crushed the Rest of the Stock Market Monday

Stock markets were mixed on Monday as investors tried to chart a course for the beginning of the second quarter of 2023. The Nasdaq Composite (^IXIC 1.99%) suffered a modest loss on the day, but the Dow Jones Industrial Average (^DJI 1.18%) moved sharply higher, leaving the S&P 500 (^GSPC 1.26%) stuck in the middle.

Data source: Yahoo! Finance.

A couple of stocks were largely responsible for the Dow's big gains. With energy prices moving sharply higher, Chevron (CVX -0.30%) was a leading contributor within the Dow. However, the big mover that gave the average the biggest boost was UnitedHealth Group (UNH -0.10%), as its outsized share price and big percentage move combined to have a triple-digit influence on the Dow.

Chevron gets help from the Middle East

Shares of Chevron moved higher by more than 4% on Monday. The major integrated oil stock benefited from geopolitical moves in the energy market that worked to its benefit.

Crude oil prices surged almost $5 per barrel on Monday, climbing above the $80 mark. The move came after major members of the Organization of Petroleum Exporting Countries announced unexpected production cuts over the weekend that could reduce supplies by as much as roughly 1.15 million barrels per day. Saudi Arabia made the largest cuts, reducing expected output by 500,000 barrels per day. Iraq, the UAE, and Kuwait all made reductions of more than 100,000 barrels per day, and a handful of smaller countries also made more modest cuts.

For Chevron, the news comes after the oil giant posted massive profits in 2022. Net income for the year amounted to nearly $35.5 billion, drawing the ire of those struggling under inflationary pressures. Investors saw direct benefits, as the company announced a 6% dividend increase in January and authorized a gargantuan $75 billion stock repurchase program.

Chevron stock remains below its all-time high set late last year, and with an earnings multiple below 10, investors clearly believe that current levels of earnings are too good to last. Nevertheless, if oil prices remain strong, Chevron could enjoy the benefits longer than many had expected.

UnitedHealth looks fit as a fiddle

Shares of UnitedHealth Group, however, were the big winners on the day. The stock climbed more than 4.5%, and because of its high share price, the $21.60 per-share gain worked out to roughly 150 points of upward pressure on the Dow Jones Industrial Average.

UnitedHealth rose in concert with other health insurance stocks, partly in response to news from the Centers for Medicare & Medicaid Services. The federal agency regulates  payment and reimbursement rates for those receiving healthcare benefits under the two programs, and the latest news was good from the managed care perspective. Although reimbursement rates will fall slightly for health insurers offering benefits through Medicare Advantage plans, the size of the reduction was smaller than many had feared. Moreover, Medicare and Medicaid expect to pay more for hospice care services, potentially putting more money in UnitedHealth's pocket as well.

Many investors might not realize that UnitedHealth is more than just an insurance company. Increasingly, acquisitions have given UnitedHealth much broader scope, adopting artificial intelligence to model claims experience more effectively and looking to offer more wellness services.

Looking ahead, UnitedHealth's valuation appears more expensive than Chevron's, but there could be greater opportunity for long-term growth. Both of these blue chip Dow stocks are worth a closer look for those seeking to add exposure in key areas like energy and healthcare.