The markets can thank a failed presidential bid for yesterday’s 772 point rally that has all three major stock indexes more than 20% above their March lows.
The Dow Jones Industrial Average climbed 3.4% or 772 points, the S&P gained 3.38% and the Nasdaq closed 2.58% higher after Democratic nominee Bernie Sanders announced he would be ending his bid for the White House and would clear the deck for Joe Biden to take on President Trump in November.
The Dow has now rallied 28.7% above its 52-week low on March 23. The S&P 500 has gained more than 25% from its March low and the Nasdaq Composite is up 22% from its low on March 23.
After Sanders announced the end of his bid for the presidency, healthcare stocks rocketed higher with the threat of “Medicare for All” and slashed profits off the table.
The Health Care Select Sector SPDR ETF (NYSE: XLV) whose main holdings are Johnson & Johnson (NYSE: JNJ), UnitedHealth Group (NYSE: UNH), Merck (NYSE: MRK) and Pfizer (NYSE: PFE) gained 4.6% on Wednesday when it became clear that without Sanders in the White House, he wouldn’t be attacking the profits of the pharmaceutical giants or using “Medicare for All” to end private health insurance.
Individually, UnitedHealth Group climbed nearly 8% after Sanders ended his bid, while other health insurers Anthem, Inc (NYSE: ANTM) jumped 10.25%, Humana (NYSE: HUM) climbed 5.38% and Cigna (NYSE: CI) rose 5.11%.
“Sanders’ exit removes the tail risk of some of his policies, immediately sets up focus on Biden vs. Trump,” said Ed Mills, policy strategist at Raymond James. “Biden’s policies will get a new scrutiny now he is the presumptive nominee, but the truth of the matter is that the market will be looking towards Washington more to help the economy and much of the assistance matches his platform.”
Oil prices also pushed the market higher, as the price of West Texas Intermediate (WTI) crude surged as much as 12% after Bloomberg reported that the OPEC nations and their allies (known as OPEC+) would be discussing a massive cut that could reach 10 million barrels per day during today’s virtual meeting. Oil closed the day up 6.18% to bring the price of WTI crude to $25.09/barrel.
Bjornar Tonhaugen, the head of oil markets at Rystad Energy said “The coming extraordinary producing-countries meeting is the only hope in the horizon for the market that could prevent a total price collapse and production shut-ins. At the moment, prices are so volatile that any news or leaks about the direction of the negotiations could move them [prices] either way. As you have seen in recent days, price swings from gains to losses and back are not unusual in such times.”
Again Capital’s John Kilduff told CNBC, “OPEC+ is trying mightily to cobble together a sizable production cut, and they are in full spin mode to try and rally prices. Tomorrow’s teleconference will be a make-or-break moment for the oil market. The math on a 10 million barrel per day cutback, which is the minimum necessary to stabilize the situation, is almost impossible to compute. I expect a bad day for OPEC+ tomorrow.”