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Health-Care Rally Helps Lift Dow Over 27000

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07/11/2019 | 11:24am EDT

By Nathan Allen and Michael Wursthorn

The Dow Jones Industrial Average rose, briefly crossing 27000 for the first time, as shares of UnitedHealth Group rallied after the Trump administration dropped its plan to curb drug rebates.

Health-care stocks were among the stock market's biggest movers Thursday following the Trump administration's decision to cancel a plan that would have curtailed billions of dollars in annual rebates worked out between drugmakers and third parties that manage benefits for Medicare as well as Medicaid managed care.

The plan's cancellation lifted a cloud of concern that had hung over companies that own pharmacy-benefit managers, many of which worried the proposal would have disrupted the U.S. pharmaceutical industry. Shares of UnitedHealth jumped 4.7%, leading the Dow industrials higher, while Cigna and CVS Health added 12% and 5.3%, respectively, helping the S&P 500 notch a slim gain in recent trading.

The blue-chip index gained 130 points, or 0.5%, to 26992 in recent trading, paring some of its earlier gains to fall back below 27000. The S&P 500, meanwhile, added less than 0.1%, while the Nasdaq Composite slipped less than 0.1%.

The blue-chip index extended its gains from Wednesday's session, helping to reverse stocks' recent faltering amid concerns that investors were overestimating the likelihood of a rate cut. Federal Reserve Chairman Jerome Powell's dovish comments and minutes from the Fed's June policy meeting reassured traders that further easing is the most likely course of action.

Mr. Powell is speaking again on Thursday, though analysts don't expect him to provide much new information. U.S. consumer-inflation data will be in focus, as weak inflation would support the case for further monetary easing.

"Powell needs a low inflation number to bolster the rate-cut case. If it proves to be just like last week's employment read and also comes in strong, then perhaps we've all been overeager for a cut," said Mike Loewengart, head of investment strategy at E*Trade.

U.S. government-bond yields, meanwhile, extended early gains after data showed that consumer prices rose in June, a sign inflationary pressures could be stabilizing after a period of weakness. Core inflation, which strips out volatile food and energy prices, rose faster than expected. The yield on 10-year U.S. Treasurys climbed to 2.087% from 2.061% a day earlier. Bond prices and yields move in opposite directions.

Elsewhere, minutes from the European Central Bank's June policy meeting showed that officials are likely to consider injecting fresh stimulus into the eurozone in light of weak inflation data. The minutes suggest policy makers will weigh cutting the bank's key interest rate or restarting its EUR2.6 trillion ($2.92 trillion) bond-buying program.

Stocks in Europe edged lower, reversing an earlier gain, as the pan-continental Stoxx Europe 600 declined 0.2%.

Write to Michael Wursthorn at Michael.Wursthorn@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
DJ INDUSTRIAL 0.07% 27171.9 Delayed Quote.16.48%
NASDAQ 100 0.90% 7905.119269 Delayed Quote.24.87%
NASDAQ COMP. 0.71% 8204.137338 Delayed Quote.23.36%
S&P 500 0.28% 2985.03 Delayed Quote.18.74%
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