Wall Street dips on healthcare losses, interest rate jitters

By Amruta Khandekar, Shristi Achar A and Saeed Azhar

(Reuters) – Wall Street’s main indexes fell in choppy trading on Thursday as losses in healthcare stocks eclipsed gains in Cisco and energy stocks, while upbeat economic data kept alive fears of interest rates remaining higher for longer.

Weighing heavily on the , CVS Health (NYSE:) tumbled 8.7% on news that Blue Shield of California plans to cut its reliance on the company as its pharmacy benefit manager (PBM) and work with others including Amazon.com (NASDAQ:).

Shares of major health insurers UnitedHealth (NYSE:) and Cigna (NYSE:), which also have PBM units, fell almost 2% and almost 7% respectively, pushing the broader S&P 500 healthcare index down 0.6%.

Higher oil prices lifted shares of Exxon Mobil (NYSE:) and Chevron (NYSE:) by over 2% each as commodities were helped by hopes that China’s central bank was seeking to bolster the property market and wider economy.

Pressuring equities further, the yield on hit its highest level since October as a raft of strong economic data this week has stoked concerns the Fed could keep interest rates at the current level for longer.

“The rise in bond yields, following years of a low-rate environment, changes the calculus in how financial markets re-adjust projections for cost of capital, earnings,” said Quincy Krosby, chief global strategist for LPL Financial (NASDAQ:).

Analysts said the higher yield will continue to put pressure on banks as depositors seek higher returns elsewhere.

The S&P 500 bank index was down 0.2%, with JPMorgan (NYSE:) down 0.6%.

A report from the Labor Department showed a fall in jobless claims last week, signaling the labor market remained tight.

Minutes from the Fed’s July meeting released on Wednesday showed most policymakers prioritizing the battle against inflation, adding to uncertainty about the central bank’s interest rate path.

So far this week, the S&P 500 has lost about 1.7%, and the Nasdaq has declined 1.9%.

The reason for the stock market’s weakness in recent days is that robust U.S. economic growth means the Fed is likely going to embrace “high rates for longer,” said Barry Bannister, chief equity strategist at Stifel.

A majority of traders expect the Federal Reserve to keep rates unchanged in September, though bets of a pause have slipped to 86.5% from about 89% a week earlier, according to CME Group’s (NASDAQ:) Fedwatch tool.

Keeping a lid on losses, Cisco Systems (NASDAQ:) gained almost 4% after the networking equipment maker’s fourth-quarter results beat estimates, and its CEO talked up artificial intelligence opportunities.

Megacap growth stocks were mixed, with Apple (NASDAQ:) down 1.4%, Amazon.com down 0.5 and Alphabet (NASDAQ:) up 1.1%.

While retail heavyweight Walmart (NYSE:) raised its full-year forecasts after beating second-quarter sales estimates, its shares fell almost 1.8%.

The was down 0.42% at 34,619.25 points, while the S&P 500 lost 0.33% to 4,389.6. The dropped 0.67% to 13,384.01.

Shares of Ball Corp (NYSE:) climbed 2.1% after Britain’s BAE Systems (OTC:) agreed to buy the beer can supplier’s aerospace assets for about $5.55 billion.

Declining issues outnumbered advancing ones on the NYSE by a 1.67-to-1 ratio; on Nasdaq, a 1.59-to-1 ratio favored decliners.

The S&P 500 posted two new 52-week highs and 15 new lows; the Nasdaq Composite recorded 19 new highs and 214 new lows.