Stocks rose on Tuesday, pushing the S&P 500 within striking distance of its all-time intraday high, as healthcare stocks surged after a government decision raised prospects of higher profits.
The group gained after the U.S. government dropped plans to cut payments for private Medicare Advantage insurers and instead said it would raise them 3.3 percent.
Humana, which derives about two-thirds of its revenue from Medicare Advantage business, rose 7 percent to $80.11. UnitedHealth Group rose 6.2 percent to $62.67, and Cigna Corp was up 4.1 percent to $65.49.
"Given how lean these companies are, this news is pretty significant and could mean a 10 to 15 percent increase in earnings," said Phil Orlando, chief equity market strategist at Federated Investors in New York.
Despite the gains, stocks in the healthcare sector are still seen as cheaper than the overall market. Humana, which has a market cap of about $11.9 billion, has a forward price-to-earnings ratio of 9.4, below the S&P 500 P/E average ratio of about 16.5. UnitedHealth has a P/E ratio of 10.6 and Cigna has a P/E ratio of 9.7.
The broad market's rise countered Monday's sell-off. Most investors expect moves to be limited this week before Friday's U.S. monthly payrolls report.
In an effort to bring down the unemployment rate, the Federal Reserve has maintained an accommodative monetary policy, which has also benefited stocks.
"Good numbers are good and bad numbers are good because it keeps the Fed at the side of the market," said Burt White, managing director and chief investment officer at LPL Financial in Boston.
"The market continues to move higher, driven by the premise of stimulus."
The March payrolls survey could give clues on lowering unemployment, one of the primary headwinds for the economy. About 200,000 jobs were created last month, according to a Reuters poll, down from 236,000 last month.
The S&P index last week set an all-time closing high but has thus far been unable to reach its intraday record of 1,576.09, an important level that analysts say could draw in more investors. Intraday sessions have been volatile, with stocks dropping sharply on Monday before rebounding.
The Dow Jones industrial average was up 94.70 points, or 0.65 percent, at 14,667.55. The Standard & Poor's 500 Index was up 10.03 points, or 0.64 percent, at 1,572.20. The Nasdaq Composite Index was up 24.48 points, or 0.76 percent, at 3,263.65.
"We've not had two consecutive up or down days in 10 sessions, and that is a good sign of a trend reversal," White said.
Investors mostly shrugged off Tuesday's data. February factory orders rose 3 percent, slightly above expectations.
The Institute for Supply Management-New York's March index of regional business activity came in at 573.3, slightly higher than last month's 572.7.
A weak reading on U.S. manufacturing sparked Monday's decline, although other recent indicators pointed to a strengthening economy and helped Dow and S&P to record highs last week.
Telecommunication shares were among the most active. Verizon Communications and AT&T have been working together on a breakup bid for British mobile operator Vodafone, according to the Financial Times' Alphaville blog.
Verizon rose 1 percent to $49.72 while AT&T was up 0.4 percent at $37.39. Both stocks are Dow components. U.S. shares of Vodafone gained 5.3 percent to $29.84.
The S&P is up 10 percent so far this year, and while investors view market momentum as positive, many are also calling for a pullback given the size and swiftness of recent gains.
Goldman Sachs removed Apple Inc from its Conviction Buy list, though it affirmed its "buy" rating on the stock. "We believe Apple may find it difficult to hit consensus expectations in the March and June quarters," the bank wrote to clients. Apple rose 1 percent to $433.03.