Health care companies weigh on US stocks; key indexes mixed

Stocks are mixed Wednesday afternoon on Wall Street, erasing some of the market's modest gains from a day earlier.

A sharp sell-off in health care companies far outweighed gains in technology and other sectors. Smaller company stocks fell more than the rest of the market.

Insurers helped drive the health care sector slide for the second straight day. Investors fear the potential impact on profits from health reform ideas being discussed in Washington and on the presidential campaign trail.

Qualcomm led the gainers in the technology sector, adding to Tuesday's 23% gain on news that the mobile chipmaker's bitter legal dispute with Apple is over. In a related move, Intel climbed after pulling out of the smartphone modem market.

T-Mobile and Sprint were both lower on reports the Justice Department is questioning their proposed merger.

PepsiCo and Morgan Stanley rose after delivering better than expected quarterly results Wednesday. IBM and Netflix fell a day after reporting their earnings.

Investors continued to pore over company earnings reports, focusing on companies' profit and revenue outlooks for the rest of this year. Analysts expect the first quarter results for S&P 500 companies overall to be the weakest in nearly three years.

"The market is in wait and see mode," said Jamie Lavin, global investment specialist at J.P. Morgan Private Bank. "We're only 10% through earnings season, but so far, so good."

The downbeat day on Wall Street followed uneven trading in global markets, despite news that China's economy grew at a better than expected 6.4% annual pace in the January-March quarter. The data suggests Beijing's efforts to halt a slowdown are working, but its economy is still growing at the weakest pace since 2009.

KEEPING SCORE: The S&P 500 fell 0.2% as of 3:21 p.m. Eastern Time. The Dow Jones Industrial Average edged up 11 points, or less than 0.1%, to 26,464. The Nasdaq composite was down 0.1%.

The Russell 2000 index of small-cap stocks gave up 0.9%.

European stock indexes finished higher. Decliners outnumbered gainers on the New York Stock Exchange.

The market has rebounded strongly from a steep sell-off late last year. The Federal Reserve helped spur the market's rebound early this year when it said that it may not raise interest rates at all in 2019. The benchmark S&P 500 remains within 1.5% of its most recent all-time high on September 20.

POLITICAL FALLOUT: Several health insurers helped pull the market lower. Anthem slumped 4%, Cigna lost 3.1% and UnitedHealth Group slid 1.4%.

Health care is the only sector in the S&P 500 that's in the red for the year with a loss of 0.7%. It's fallen more than 4% so far this week.

The decline is partly due to investors favoring cyclical growth sectors, such as materials, energy and technology, at the expense of less risky seeming stocks.

More recently, presidential politics has hurt the sector. Democratic presidential candidates such as Sen. Bernie Sanders of Vermont, who is emerging as the early fundraising front-runner, has been making the case for a "Medicare for All" plan that could replace private coverage.

"There is a growing perception that the popularity of universal health care is growing among the electorate, forcing investors to take notice as the odds of meaningful regulation increase," Alex Young, managing director of global markets research at FTSE Russell, wrote in a research note Wednesday.

While the likelihood of a major health care overhaul remains relatively low, enough uncertainty exists that investors are now selling first and asking questions later, Young added.

SPOTTY RECEPTION: Sprint and T-Mobile shares fell after a Wall Street Journal report cast doubt on the likelihood of government approval of the companies' $26.5 billion merger.

The Journal said that Justice Department antitrust personnel reviewing the takeover questioned the companies' reasoning for it in a meeting this month. Talks between regulators and the companies are ongoing, according to the report, which cited unnamed people familiar with the matter.

Sprint shares slid 5.7%, while T-Mobile dropped 2.3%.

BIG SETTLEMENT: Qualcomm jumped 11.1%, adding to a big gain Tuesday on news that the mobile chipmaker's bitter legal dispute with Apple is over. It centered on technology that enables iPhones to connect to the internet.

The settlement, announced Tuesday, requires Apple to pay Qualcomm an undisclosed amount. It also includes a six-year licensing agreement that likely involves recurring payments to the mobile chip maker. Apple rose 1.8%.

In a related move, Intel climbed 3.6% after pulling out of the smartphone modem market.

NOW THAT'S REFRESHING: PepsiCo shares climbed 3.5% after the soda and snack maker reported better than expected first quarter profit and said earnings at its Frito-Lay division were particularly strong.

ON TRACK: Railroad operator CSX climbed 4.1% a day after it turned in quarterly results that topped Wall Street's forecasts.