The U.S. healthcare sector experienced a turbulent trading session on April 17, 2025, as UnitedHealth’s UNH earnings disappointment sent ripples through insurer stocks. However, strong gains in drugmakers, particularly Eli Lilly LLY, helped make up for broader sector losses.
UnitedHealth’s sharp 22.4% drop following weak earnings and soft guidance echoed across the insurer landscape, dragging down key players like CVS Health, Humana, and Elevance Health. The results spotlighted how exposed health insurers are to company-specific missteps and shifting policy risks.
Despite the pressure on managed care, Eli Lilly’s 14.4% surge on April 17 served as a reminder of the power of innovation in driving sector performance. Eli Lilly announced that its experimental weight-loss pill, orforglipron, performed on par with the widely used injectable drug Ozempic in reducing both weight and blood sugar levels in patients with type 2 diabetes. Its success helped cushion sector-wide declines.
Johnson & Johnson JNJ maintained its stable trajectory, supported by solid earnings. JNJ shares gained 2.3% on the day. Meanwhile, medical device and equipment makers such as are increasingly hogging investor attention, benefiting from long-term demand trends tied to an aging global population.
Health Care Select Sector SPDR Fund (XLV): Insurers Drag, But Pharma Lifts the Mood
Health Care Select Sector SPDR Fund XLV houses Eli Lilly (12.29%), UnitedHealth (9%), and Johnson & Johnson (7.47%) among its top holdings. Overall, the fund lost 0.6% on the day.
iShares U.S. Pharmaceuticals ETF (IHE): Pharma-Powered Rally
iShares U.S. Pharmaceuticals ETF IHE saw a strong influx of investor interest as capital rotated into large-cap pharmaceutical stocks, spurred by Eli Lilly’s success.The rally came even as Novo Nordisk—a key competitor in the GLP-1 space—tumbled nearly 8%. IHE ETF jumped 4.6% on that day.
SPDR S&P Pharmaceuticals ETF (XPH): Another Pharma Gainer
SPDR S&P Pharmaceuticals ETF XPH gained on the back of widespread strength in the pharmaceutical sector. Investor enthusiasm, driven by innovation-led sentiment from Eli Lilly’s news, supported a broad rally in drug stocks. The XPH ETF rose 2.2% on April 17.
iShares U.S. Healthcare Providers ETF (IHF) : Hurt by Health Insurers’ Losses
iShares U.S. Healthcare Providers ETF IHF is heavy on UNH, Elevance Health ELV (down 2.4%), Humana HUM (down 7.4%), CVS Health Corporation CVS (down 1.84%). Due to the hit from these stocks, the fund dived over 6% on April 17.
Thursday’s market activity delivered a crucial message: healthcare is not a rock-solid sector across the board. While insurers are facing headwinds currently, drugmakers are gaining momentum. The medical sector is expected to record 34.7% earnings growth in Q1 2025, on 7.5% higher revenues.
While political policy changes and earnings surprises will likely continue to shake up the sector, strong fundamentals in pharma—as well as the sector’s inherent safe-haven status—should bode well for the space.
Note that The SPDR S&P Health Care Services ETF (XHS) andIHF have delivered strong relative returns over the past month. Despite losses of 2.3% and 3.6%, respectively, both outperformed the S&P 500’s 6.8% decline.
In early April, the U.S. government announced a more than 5% average increase in government reimbursement rates for 2026 Medicare Advantage plans run by private insurers, a plus for healthcare providers. The significant increase is expected to generate $25 billion in additional revenue for the industry, the Wall Street Journal reported, as quoted on Forbes.
If the Republican government remains favorable to health insurers in the coming days, we can expect a rally in health insurer stocks as well, which in turn should benefit the broader medical sector.
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UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report
Johnson & Johnson (JNJ) : Free Stock Analysis Report
Eli Lilly and Company (LLY) : Free Stock Analysis Report
Humana Inc. (HUM) : Free Stock Analysis Report
CVS Health Corporation (CVS) : Free Stock Analysis Report
Health Care Select Sector SPDR ETF (XLV): ETF Research Reports
iShares U.S. Healthcare Providers ETF (IHF): ETF Research Reports
iShares U.S. Pharmaceuticals ETF (IHE): ETF Research Reports
SPDR S&P Pharmaceuticals ETF (XPH): ETF Research Reports
Elevance Health, Inc. (ELV) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
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