Stocks volatile over EU, banks and Obamacare

US stocks fell yesterday but pared back sharp losses late in the session on talk of progress by European leaders in easing the region’s debt crisis, while the Supreme Court’s ruling upholding a landmark healthcare law hit large health insurers.

Markets are especially skittish about any shift in expectations for the Eurozone as European Union leaders began a two-day summit in Brussels.

“This is a process that is just going to wind on and is going to bring us periodic bouts of volatility in our markets depending on the news flow,” said Matt Kaufler, portfolio manager at Federated Investors in Rochester, New York.

The Dow Jones industrial average dropped 24.75 points, or 0.20 per cent, to 12,602.26. The Standard & Poor’s 500 Index shed 2.81 points, or 0.21 per cent, to 1,329.04. The Nasdaq Composite Index lost 25.83 points, or 0.90 per cent, to 2,849.49.

Stocks began lower and losses accelerated after a divided US Supreme Court backed the centrepiece of President Barack Obama’s healthcare overhaul law.

The decision surprised many investors who see the law, which requires that most Americans obtain insurance by 2014 or face a penalty, as a hallmark of a business unfriendly administration.

Shares later pared losses, though major insurers such as Aetna, which face more regulation, ended lower. Other companies reliant on Medicaid, such as Wellcare Health Plans rose as their patient rolls are expected to increase.

The Morgan Stanley healthcare payor index added 0.6 per cent. Aetna ended down 2.7 per cent to $39.85; Wellcare jumped 8.8 per cent to $53.98.

“Because it was such an unexpected result from the Supreme Court today you knew the market had to have at least a short-term violent reaction,” said Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis.

“At the end of the day what does it really change for the performance to the end of the year - probably not much.”

Shares of JPMorgan Chase dropped 2.5 per cent to $35.88 after a New York Times report projecting that losses from a recent botched trade could reach $9bn, more than four times the original estimate. A Reuters report estimated the losses between $4bn to $6bn.

US-traded shares of Barclays slumped 12.1 per cent to $10.84 after Britain said it had brought in the fraud squad to investigate possible crimes over attempts to manipulate lending rates, a scandal that is expected to spread to other banks. Lloyds fell 3.6 per cent to $1.87 in New York. Bank of America shares slipped 0.4 per cent to $7.74