Drug stocks hit by Amazon health push, while tech steadies Wall Street

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(Reuters) – Amazon’s move to entrench itself in the health sector sent drug stocks sliding on Thursday, but gains in financial and technology stocks helped Wall Street keep its footing.

FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., June 27, 2018. REUTERS/Brendan McDermid

Amazon.com said it would buy online pharmacy PillPack, sending shares of drug distributors and retailers tumbling as the e-commerce giant moves deeper into the healthcare sector.

Walgreens Boots Alliance, already under pressure after its third-quarter earnings report, tumbled 10.5 percent and along with UnitedHealth’s 2.4-percent drop pulled the Dow Jones Industrial Average lower.

Shares of CVS Health sank 9.3 percent, Rite Aid fell 10.1 percent and Express Scripts was down 3.2 percent.

The S&P health sector dropped 0.73 percent, the most among the 11 S&P sectors, while Amazon gained 0.8 percent.

The U.S. economy slowed more than previously estimated in the first quarter, with Commerce Department data showing gross domestic product increased at a 2 percent annual rate in the period, instead of the 2.2 percent pace reported last month.

The revision came amid the weakest performance in consumer spending in nearly five years and with the United States engaged in tit-for-tat trade tariffs with its major trade partners, including China, Canada and the European Union.

While data shows the U.S. GDP growth appears to have regained momentum in the second quarter on the back of a robust labor market and tax cuts, analysts fear the tariff wars could undermine those benefits.

“Investors remain fixated on trade disputes which continue to weigh on risk appetite,” said Craig Erlam, senior market analyst at online forex broker Oanda.

“With Trump picking fights on multiple fronts and no sides showing any willingness to back down, we may have to get used to this risk-averse environment in the near-term.”

At 9:59 a.m. EDT the Dow Jones Industrial Average was down 76.70 points, or 0.32 percent, at 24,040.89, the S&P 500 was up 1.76 points, or 0.07 percent, at 2,701.39 and the Nasdaq Composite was up 9.90 points, or 0.13 percent, at 7,454.98.

Amazon’s burgeoning reach was not limited to just the health sector. Its plans to entice entrepreneurs to set up their own package-delivery businesses sent shares of United Parcel Service and FedEx skidding about 2.5 percent each.

Seven of the 11 major S&P sectors were higher, with the financial index gaining 0.19 percent ahead of results from the second round of the Federal Reserve’s stress test for banks and lenders.

The technology sector’s 0.43 percent jump gave the biggest boost to the market.

Accenture jumped 5.1 percent after the consulting and outsourcing services provider reported quarterly revenue and profit above estimates.

Marvell Technology jumped 7.9 percent after the chipmaker said China cleared its $6 billion acquisition of rival Cavium, which rose 9.6 percent.

Declining issues outnumbered advancers for a 1.20-to-1 ratio on the NYSE and a 1.16-to-1 ratio on the Nasdaq.

The S&P index recorded seven new 52-week highs and 22 new lows, while the Nasdaq recorded 17 new highs and 67 new lows.

Reporting by Sruthi Shankar in Bengaluru and Savio D’Souza; Editing by Shounak Dasgupta

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