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24 Feb 2014
S&P hits record high as fundamentals come to the fore
FXStreet (London) - The S&P 500 today broke to new record highs. The gains were led by oil producers as crude contracts held above the USD100 level for the 11th-straight day. However, additional momentum was given by healthcare providers on the prospect of lower-than-expected cuts to Medicare.
Fundamentals versus the Fed
The new highs come despite the continuation of the US Federal Reserve's tapering of its monthly asset purchases. Since taking over as chairman of the Fed, Janet Yellen has implied that the threshold below which the Fed would consider taking the foot off the brake is lower than some May have hoped. Despite a recent run of poor US data, Yellen has signalled that there would need to be a serious deterioration in the US economy for the central bank to slow its rate of cuts to the current USD65bn-a-month program.
Shot in the arm for medical providers
The S&P has gained 1.19 percent so far today, helped by gains in medical and pharmaceutical stocks, with Humana, UnitedHealth Group and Pfizer leading the way.
Expectations had originally been for a 6-7 percent cut in payments to private health insurers for 2015 Medicare Advantage plans. UnitedHealth Group Inc, Humana Inc and Aetna Inc manage almost a third of the private pension plans held by the 50 million Americans eligible, all of whom saw stock prices when the details of the proposal filtered through. However, with the planned cuts facing strong opposition from House Republicans, the cuts are likely to be at a lower 3.55 percent, but opposition could see this pushed lower.
The S&P has under-performed against other US equity indices in the year-to-date. But today's gains show some signs of fundamentals coming to the fore, rather than the central bank liquidity-driven momentum that has dominated.
The S&P is currently trading at 16,288.58 after hitting a record high at 16,300.04.
Fundamentals versus the Fed
The new highs come despite the continuation of the US Federal Reserve's tapering of its monthly asset purchases. Since taking over as chairman of the Fed, Janet Yellen has implied that the threshold below which the Fed would consider taking the foot off the brake is lower than some May have hoped. Despite a recent run of poor US data, Yellen has signalled that there would need to be a serious deterioration in the US economy for the central bank to slow its rate of cuts to the current USD65bn-a-month program.
Shot in the arm for medical providers
The S&P has gained 1.19 percent so far today, helped by gains in medical and pharmaceutical stocks, with Humana, UnitedHealth Group and Pfizer leading the way.
Expectations had originally been for a 6-7 percent cut in payments to private health insurers for 2015 Medicare Advantage plans. UnitedHealth Group Inc, Humana Inc and Aetna Inc manage almost a third of the private pension plans held by the 50 million Americans eligible, all of whom saw stock prices when the details of the proposal filtered through. However, with the planned cuts facing strong opposition from House Republicans, the cuts are likely to be at a lower 3.55 percent, but opposition could see this pushed lower.
The S&P has under-performed against other US equity indices in the year-to-date. But today's gains show some signs of fundamentals coming to the fore, rather than the central bank liquidity-driven momentum that has dominated.
The S&P is currently trading at 16,288.58 after hitting a record high at 16,300.04.