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How UnitedHealth Cured the Dow on Tesla's Big Day

By Dan Caplinger - Apr 1, 2013 at 8:00PM

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The Dow's losses were cut to almost nothing as the health insurer soared.

Stock market investors have seen a number of days recently that look a lot like what happened today. After jumping to a modest early gain, the Dow Jones Industrials (^DJI 1.76%) gave up ground and by midday was trading down by more than 45 points. But in the final half-hour of trading, the stock market climbed back and finished down just six points, as investors apparently chose to focus on more optimistic sentiment like their views for the coming earnings season. Broader markets stayed mired in bigger losses, as the Nasdaq fell almost 1% and the S&P 500 gave up half a percent.

UnitedHealth (UNH 0.97%) was a big contributor to the late recovery, soaring more than 3% and adding further gains after hours immediately following the close. Along with Humana, UnitedHealth got hit hard last month on news that reimbursement rates for Medicare Advantage plans might fall, because the two companies rely heavily on such reimbursements as part of their overall business. But with a ruling imminent, investors have apparently had second thoughts about whether the Centers for Medicare and Medicaid Services will follow through on those cuts, as Humana spiked up almost 9%.

Elsewhere, Tesla Motors (TSLA 7.33%) finished the day up 16%. The company announced guidance for a surprise profit in the first quarter, proving the success of Tesla's Model S electric vehicle. The big question going forward for the automaker, however, is whether there's enough demand for its high-end niche products to drive sales forward as much as Tesla needs in order to justify its current stock valuation. Meanwhile, bigger competitors are waiting in the wings to see if Tesla's experiment succeeds, and if it does, then you can expect copycats from all corners to meet the demand that Tesla will have produced.

Finally, GameStop (GME 6.81%) soared more than 6% on hopes that new versions of the PlayStation and Xbox will prompt a new round of purchases of the console-based video games that GameStop has traditionally relied on. Although many analysts have expected online games to continue displacing much more expensive stand-alone console games, GameStop has nevertheless held up well, thanks largely to sales of popular blockbuster series installments. For GameStop to succeed, those consoles will have to draw substantial interest -- something that's far from certain right now.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$33,212.96 (1.76%) $575.77
UnitedHealth Group Incorporated Stock Quote
UnitedHealth Group Incorporated
$507.11 (0.97%) $4.88
Tesla, Inc. Stock Quote
Tesla, Inc.
$759.63 (7.33%) $51.90
GameStop Corp. Stock Quote
GameStop Corp.
$137.21 (6.81%) $8.75

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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