Wall Street’s election winners and losers

Alisa Roth Nov 9, 2006

KAI RYSSDAL: This election’s reverberating from Pennsylvania Avenue all the way up to Wall Street. Alternative energy companies and biotechs have been celebrating Democratic wins. HMOs and other healthcare stocks are less thrilled. Marketplace’s Alisa Roth has more now from New York.

ALISA ROTH: The elections may be over, but pundits are still weighing in on the outcome. So is Wall Street. Stock prices of health-insurance providers Humana and WellPoint are both down today. So are shares at drug companies like Eli Lily and Novartis.

Tom Gallagher is a political economist at the ISI Group. He says it’s all about anxiety in the healthcare sector: the Democrats want HMOs to get lower reimbursements from Medicare, and they want the government to negotiate better prices under the prescription drug benefit.

TOM GALLAGHER: So those are both negatives that they’ll probably have a chance to act on over the next couple of years. So those are natural areas for the markets to discount the effect of the change to a Democratic Congress.

But he warns that not all downward trends in the market are warranted. Defense contractors Lockheed Martin and Northrop Grumman were down, too. Speculation is that Democrats who oppose the war in Iraq will try to cut defense spending. But Gallagher says that’s just not true, since the military will need supplies as long as the war continues.

But Moody’s economist Gus Faucher thinks all the changes we’re seeing are just momentary responses to the headlines.

GUS FAUCHER: I think most of this was actually built into the markets over the last few months. Markets are forward-looking. It’s not just like the markets woke up on Wednesday morning and said, “Geez, the Democrats are going to win.”

He says some sectors may see short-term reactions. But, of course, we won’t see the full impact of a Democratic Congress until at least January.

In New York, I’m Alisa Roth for Marketplace.

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