As expected, the Federal Reserve raised interest rates on Wednesday. Unexpectedly though, the Federal Open Market Committee also warned the market it may see one or two more rate hikes than it was counting on during 2017. Spooked investors fled stocks, sending the S&P 500 to a close of 2,253.28 for the session. That was 0.81% lower than Tuesday’s last trade.
The day was decidedly worse for owners of Encana Corp (USA) (NYSE:ECA), Universal Health Services, Inc. (NYSE:UHS) and Express Scripts Holding Company (NASDAQ:ESRX) though. These three names led the bearish charge, fueled more by fear than actual results.
Universal Health Services, Inc. (UHS)
Within sight of the end of Obamacare and with a new President as well as a new healthcare paradigm underway, the last thing any company in the sector wants to be is conspicuous and questionable. Too bad for Universal Health Services that it’s both of those things.
That was the general assessment from Raymond James today anyway, which downgraded UHS to “Market perform.” Analyst John Ransom explained that some new scrutiny by the federal government “[raised] the political risk to a more dangerous level … [and] … could invite more caution and/or red tape into the admissions process — either externally or from self-policing.”
That scrutiny came in the form of a question from Iowa Senator Chuck Grassley, who wanted an update from the hospital network’s investigation of itself that reports it was deliberately miscoding patients upon admission in order to drive more revenue.
UHS ended the day down 6.8%.
Express Scripts Holding Company (ESRX)
UHS was hardly the only healthcare stock to take one on the chin, however. Medical benefits manager Express Scripts also ended the day in the red, to the tune of 3.6%.
The catalyst for the setback was its full-year profit guidance. The company now expects earnings of between $6.82 and $7.02 per share of ESRX for 2017. That was roughly in line with analyst estimates for a profit of $6.93 per share, but the stock’s setback suggests traders were counting on more bullish guidance.
Perhaps fanning the flames that burned ESRX were continued worries that whatever Donald Trump has in mind as a replacement for Obamacare could present challenges for the company. Express Scripts CEO Tim Wentworth made a point of explaining he didn’t see any aspect of Trump’s presidency posing a threat to earnings, but traders aren’t convinced.
Encana Corp (USA) (ECA)
Last but not least, although most energy stocks ended the day in the red on Wednesday, it was Canadian-based Encana that suffered the most.
The catalyst for the pullback was a bit of a chain reaction. The Federal Reserve raised interest rates, as expected, which in turn boosted the value of the U.S. dollar by a solid 1%. Since crude oil is priced in U.S. dollars, the greenback’s rise sent oil prices down a whopping 3.7%. Lower oil prices are the last headwind any company in the energy sector needs to contend with right now … least of all, Encana.
It’s not clear how long the dollar will remain propped up and how long crude will remain suppressed. Traders think it could be long enough, though, to send ECA to a loss of 5% on Wednesday.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.