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NASDAQ Drops After U.S. Supreme Court Upholds ACA Provisions

June 28, 2012

Investor concerns about the United States Supreme Court’s decision to uphold the constitutionality of the 2010 healthcare overhaul law pushed stocks near session lows, compounding worry brought on by another round of dour U.S. economic data, according to wire reports and the NASDAQ composite index.

The Dow Jones Industrial Average tumbled 142 points, or 1.1%, to 12484, erasing all of Wednesday’s 92-point advance and putting blue chips firmly in the red for the week.

The Standard & Poor’s 500-stock index declined 15 points, or 1.1%, to 1317, while the Nasdaq Composite slid 41 points, or 1.4%, to 2834.

Stocks bounced around after the court’s ruling, then slid to session lows as investors digested the implications of the Court’s decision.

The Court said Congress was acting within its powers under the Constitution when it required most Americans to carry health insurance or pay a penalty–the provision at the center of the two-year legal battle.

Stocks within the health-care sector move sharply in opposite directions.

Hospital stocks surged after the decision. Hospitals have been rooting for the law to stay, as it would provide health coverage to more Americans. HCA Holdings surged 11%, while THC Healthcare rose 10% and Community Health Systems added 10%

Meanwhile, insurance providers like WellPoint, UnitedHealth Group, Aetna and Cigna all fell more than 3.5%. The law carries significant risks for insurers, as the price and design of individual health plans will change markedly.

“When we were speaking to clients, the consensus was that if it gets overturned that would be a positive, and if it doesn’t, that would be a negative. Nothing was priced in because it could have gone either way,” said Rick Fier, director of equity trading at Conifer Securities.

The ruling “takes a question mark away, but I think it hurts small businesses, and this isn’t going to get them off the fence to start hiring,” said Mr. Fier.

Others were more sanguine about the impact of the Court’s decision on the market.

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