Investors anxiously await decision on health care

New York : Washington's bid to put finishing touches on health care reform today should help lift uncertainty on Wall Street, but there may be some turbulence along the way this week as the recent rally appears to be fraying.

Democratic leaders in the US House of Representatives pushed undecided members for support and voiced growing confidence on Friday they will win a close vote on final passage of a bill that requires a sweeping overhaul of the country's health care system.

The House is scheduled to vote today on President Barack Obama's top domestic priority, which has picked up momentum in recent days with backing from former opponents.

The Dow Jones industrial average and the benchmark Standard & Poor's 500 Index are pushing against levels last seen in October 2009, having rebounded from a mid-January sell-off that took the S&P 500 down as much as 8.1 per cent through early February from the 15-month peak of January 19.

The S&P 500 is up 71 per cent from the March 2009 bottom. It registered its biggest percentage drop in almost a month, falling 0.51 per cent to 1,159.90 in Friday's session, but it still managed to score a 0.9 per cent gain for the week.

The Dow industrials climbed 1.1 per cent for the week, while the Nasdaq added 0.3 per cent.

Shares of health care insurers, who have been criticised by Obama in recent weeks, could rally if the vote helps remove the uncertainty about their profit outlook, analysts say.

"The market doesn't like indecision. Whichever way it goes, there will be a decision and then people can move on," said Neil Catania, floor broker at MND Partners in New York.

"If the bill passes, you'll have a majority of people putting some money to work. It's a mixed bag, though, because what's good on one side is going to hurt another side. But more important than anything is the decision."

Improving sentiment

The Morgan Stanley Health care Payor Index capped its biggest five-day run-up in three months on Friday as investors bet that their prospects might end up not being as adversely affected as previously feared.

But improving sentiment over health care just might not be enough to overcome anxiety that is now buffeting the market as investors look for fresh catalysts to push ahead a year-long rally in US stocks.

This week, housing will be another dominant theme with the release of February existing home sales on Tuesday and a report on February new home sales on Wednesday.

Investors will pay close attention to home sales because the housing sector is still struggling with a tide of foreclosures after the subprime mortgage crisis that surfaced in 2007 and helped push the US economy into one of the worst recessions since the 1930s. A stronger housing market is deemed crucial to the US economy's health.

On Friday, the focus will turn to the government's final reading on fourth-quarter gross domestic product and the final word on March consumer sentiment from the Reuters/University of Michigan surveys.

Investors will be hard pressed to see if the reports offer more evidence that the US economic recovery continues to gain traction.

"Just given the moves we've seen over the past month, a very rapid ascent, I think the market will probably welcome a period of time where we might be able to digest some of this data going forward," said Christian Hviid, chief market strategist at Genworth Financial Asset Management in Encino, California. "That probably argues for a more sideways move in the market."

Although the first-quarter earnings period is still weeks away, a few companies are due to report this week.

The calendar includes technology bellwether Oracle Corp, whose results and outlook could help set the tone for the coming earnings season.