Small gains for Wall Street propelled the Nasdaq to a record on Friday, Oct. 13, even as the White House's surprise cut of Obamacare subsidies rocked healthcare stocks .
The Dow Jones Industrial Average was up 0.13%, matching a previous record, while the Nasdaq increased 0.22% to an all-time high of 6,605. The S&P 500 fell shy of its own record by just points. All three hit all-time intraday highs earlier in the session.
Health insurance stocks such as UnitedHealth Group Inc. (UNH - Get Report) and Aetna Inc. (AET) slumped after President Donald Trump made his biggest move yet to dismantle the Affordable Care Act. The Department of Health and Human Services moved late Thursday, Oct. 12, to cut off subsidies to health insurers under the Obama-era Affordable Care Act.
"We will discontinue these payments immediately," said acting HHS Secretary Eric Hargan and Medicare administrator Seema Verma.
The White House said in a separate statement that the government cannot legally continue to pay the so-called cost-sharing subsidies because they lack a formal authorization by Congress. Halting the payments is likely to trigger a spike in premiums for next year, unless Trump reverses course or Congress authorizes the money. The next payments are due around Oct. 20.
UnitedHealth, Aetna, Cigna Corp. (CI - Get Report) , Anthem Inc. (ANTM - Get Report) , and Humana Inc. (HUM - Get Report) all declined. The Health Care Select Sector SPDR ETF (XLV - Get Report) decreased 0.3%.
Bank of America posted higher quarterly profit than analysts estimated, driving shares 1% higher. Increasing interest rates fueled returns on lending enough to overcome sliding bond-trading revenue. Earnings of 48 cents a share rose 7 cents from a year earlier and beat estimates by 2 cents. Net income increased 13% to $5.6 billion.
Revenue from trading bonds, currencies and interest-rate swaps fell 19% to $2.15 billion at Bank of America. JPMorgan Chase & Co. (JPM - Get Report) and Citigroup Inc. (C - Get Report) both saw a drop in trading revenue over their third quarter. The two reported earnings on Thursday, unofficially kicking off the third-quarter earnings season.
Wells Fargo fell more than 3% after reporting a drop in earnings over its recent quarter, a result of a one-time charge tied to mortgage investigations. The bank earned 84 cents a share, down from $1.03 a year earlier. Analysts anticipated earnings of $1.02 a share. The one-time charge amounted to 20 cents a share in litigation costs. Revenue declined 2% to $21.9 billion, also missing estimates.
"Over the past year we have made fundamental changes to transform Wells Fargo as part of our effort to rebuild trust and build a better bank," CEO Tim Sloan said in a statement. The bank has struggled to right itself after a string of consumer sales scandals over the past 12 months.
Just 6% of S&P 500 companies have reported earnings so far, the majority of which have bested profit and sales estimates. Analysts anticipate blended earnings growth of 4.4% in the third quarter, or 2.3% excluding energy, according to Thomson Reuters estimates. Revenue is expected to rise by 4.4%.
Consumer prices rose in September, though the core rate of inflation remained stubbornly below the Federal Reserve's 2% target.
The consumer price index increased 0.5% last month, according to the Bureau of Labor Statistics, 10 basis points below estimates. Year over year, consumer-price growth widened to 2.2% from 1.9%. However, excluding food and energy, core prices increased just 0.1% and held flat at 1.7% on a year-over-year basis.
Inflation trends remain a conundrum to Federal Reserve members. According to September meeting minutes, some members are concerned that low inflation readings could "prove more persistent" than transitory. The Fed has still signaled that it expects to hike rates again by year's end.
"With financial conditions still very accommodative, the strength of growth will be enough to prompt a rate hike unless the inflation picture deteriorates further -- something that was not in evidence in today's data, despite the miss relative to consensus," said Eric Winograd, U.S. economist at AB (AllianceBernstein).
Fed Vice Chair Stanley Fischer advised the central bank to be "more careful than full speed ahead" until uncertainty over inflation trends dissipates. In an interview at the World Bank/International Monetary Fund on his final day in the position, Fischer said strong economic growth made four rate hikes by the end of 2018 still possible. Fischer also called for Fed Chair Janet Yellen to be reappointed as she offers a "safe pair of hands."
Consumer spending made a comeback in September. Retail sales increased 1.6% in September, according to the Census Bureau, reversing a 0.1% dip a month earlier. Analysts had expected a slightly faster pace of 1.7%. Excluding autos, sales increased 1%, faster than an anticipated increase of 0.8% and five times the pace of growth in August.
"Retail sales ended the third quarter with a bang," Eugenio J. Alemán, senior economist at Wells Fargo, wrote in a note. "This will give a boost to personal consumption expenditures, which started the third quarter on a weak note."
Consumer sentiment improved in early October, hitting its highest level since the beginning of 2004, according to the latest reading from the University of Michigan. The index of consumer sentiment increased to a reading of 101.1 in October, up from 95.1 in September. That marks a nearly 16% year-over-year increase. Both the view on current economic conditions and expectations for future growth rose this month. A final reading on sentiment will be released on Oct. 27.
In stock news, HP Inc. (HPQ - Get Report) surged more than 6% after issuing solid guidance for its fiscal 2018. Earnings forecasts of $1.74 to $1.84 a share wrapped analysts' estimates of $1.76. HP's board also authorized a 5% increase to its quarterly dividend.
U.S. steel stocks were higher on Friday as a scandal at Japan's Kobe Steel Ltd. raised the chances of global supply chain issues. Kobe admitted earlier in the week to fabricating quality data on its products, affecting as many as 200 to 500 firms. An internal investigation at the company unearthed 70 cases of false data.
AK Steel Holding Corp. (AKS - Get Report) , Commercial Metals Co. (CMC - Get Report) , United States Steel Corp. (X - Get Report) , Worthington Industries Inc. (WOR - Get Report) , Steel Dynamics Inc. (STLD - Get Report) and Nucor Corp. (NUE - Get Report) were all higher on Friday.
Crude oil prices held gains on Friday afternoon after a report showed drilling activity slowed for the second week in a row. The number of active rigs drilling for oil in the U.S. decreased by 5 to 743 in the past week, according to Baker Hughes. The overall number of active rigs fell by 8 to 928.
West Texas Intermediate crude rose 1.1% to $51.17 a barrel.
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