Health-related stocks take beating

NEW YORK - This time, health care stocks bore the brunt of investors' wrath.

Health insurers and drug companies, some of the better performers on Wall Street lately, led the market lower Thursday after the White House proposed cutting payments to private insurance plans.

The Obama administration's $3.55 trillion budget plan for 2010 includes cuts to Medicare and Medicaid.

Private insurance plans serving Medicare seniors would take the biggest hit, but hospitals, drug manufacturers and home health agencies also would face cuts.

Banking shares initially pulled much of the market higher as investors welcomed plans from Washington for additional bailout measures that could provide up to $750 billion in support to the struggling banking system.

But the Obama administration said the money was for a contingency fund and that it didn't plan to immediately ask Congress to add to the government's existing $700 billion rescue program. Many financial stocks still managed to close the day higher.

The day's gyrations showed how fractious the market is, with investors ready to turn on stocks at the first whiff of bad news.

The major stock indexes gave up early leads to close lower.

The Dow Jones industrial average fell 88.81, or 1.2 percent, to 7,182.08, pulled down by stocks including drugmaker Merck & Co., down $1.87, or 6.7 percent, at $26.04 and health products company Johnson & Johnson, off $1.52, or 2.8 percent, at $52.44.

The Standard & Poor's 500 index fell 12.07, or 1.6 percent, to 752.83 and the Nasdaq composite index fell 33.96, or 2.4 percent, to 1,391.47.

Among health insurers, WellPoint Inc. fell $3.78, or 9.7 percent, to $35.34, while UnitedHealth Group Inc. fell $2.96, or 12.9 percent, to $20.07. Aetna Inc. fell $3.05, or 11.3 percent, to $24.03.

Light, sweet crude rose $2.72 to $45.22 on the New York Mercantile Exchange.