Permanent Value

Weekly Update: March 22- 26, 2010

Michael La Salle
March 26th, 2010

Stocks Close Higher as President Obama Signs Health Care Reform Bill

Stocks finished higher this week as President Obama signed the Health Care Reform Bill on Monday.  The S&P 500 gained 1.44% as the Dow Jones Industrial Average gained 2.12%.  Google’s decision to pull out of mainland China also dominated this week as the technology giant fought back against the Chinese government’s internet censorship.  After over a month of struggle, European leaders agreed on a plan to bail Greece out of its crisis on Thursday.

In economic news, fourth quarter economic growth was up but not as much as economists’ expectations of 5.9% as the Gross Domestic Product was up an annualized 5.6% for the quarter.  Durable Goods orders also disappointed as the month over month change came in at 0.5%, falling short of analysts’ projections of an increase of  1.0%.  Although extremely weak, existing home sales beat expectations of 5 million annualized as the actual number came in at 5.02 million annualized.

In earnings news, Tiffany & Co. disappointed as the fine jewelry retailer announced fourth quarter earnings of $1.09 per share, coming in three cents lower than the expected $1.13 per share.  Electronics retailed Best Buy Co., Inc. beat analysts’ estimates of $1.79 per share by posting earnings of $1.82 per share.

What opportunities are ahead?

For quite some time now we have been inundated with talks of health care reform.  No matter which side of the aisle you stand in, there seemed to be a sense of relief washing over the nation after being liberated from the tension in Washington D.C. as President Obama put pen to paper making health care reform a reality.

While there is still some confusion about what this means for Americans, as with every major policy change, there are always doors to investment opportunities that will open as well as close.  In the case of the new health care reform bill, one of the big questions about the bill is how it will affect insurers and their profitability.  In the same boat as insurers, biotechnology companies may also take a hit because the new reform does not bode well for medical innovation.

As stated earlier some doors will close while others open.  The new bill is meant to provide healthcare coverage to approximately 32 million new people in the United States.  Two sectors that will benefit from a surge of new c are medical device and pharmaceutical (primarily generic brands) companies.  As these consumers who were previously locked out of medical care due to preexisting illnesses or unaffordable insurance premiums begin to receive the medical attention, they need they will be prescribed medications and have surgeries that they could not previously afford.

As the ink dries on this bill and the details are ironed out, new doors will continue to open and close, and investors will continue find places to invest.

Market Returns

  This Week Year to Date Last Year Last 5 Years
S&P 500 1.44% 4.62% 40.07% -0.41%
Dow Jones Industrial Average 2.12% 4.05% 36.92% 3.90%


Next Week’s Economic Releases

March 29 – Personal Income & Outlays

March 30 – Consumer Confidence

April 1 – ISM Manufacturing Index

April 2 – Employment Situation