(CNBC) – Stocks added to sharp losses across the board Thursday after the Supreme Court upheld a key part of President Obama’s health care overhaul and amid skepticism that European leaders would be able to form a solution to tackle the ongoing debt crisis.
The Dow Jones Industrial Average fell sharply, led by JPMorgan [JPM 35.36 -1.42 (-3.86%) ] and Intel [INTC 25.6384 -0.5816 (-2.22%) ], after finishing higher for the second day in the previous session.
The S&P 500 and the Nasdaq also dropped more than 1 percent. Nasdaq briefly turned negative for the month of June. The CBOE Volatility Index, widely considered the best gauge of fear in the market, jumped near 21.
All 10 S&P sectors were trading in negative territory, led by financials and techs.
The Supreme Court upheld the individual health insurance requirement in President Obama’s health-care law, a victory for Democrats and Obama. (Read More: What Is the Health Insurance Mandate?)
Obama called the Supreme Court’s decision “a victory for people across the country,” while Mitt Romney said he will work “on my first day as president” to repeal the law if he’s elected in November.
Medicaid-related stocks such as Amerigroup [AGP 65.59 3.19 (+5.11%) ] and Molina [MOH 22.87 1.55 (+7.27%) ] jumped following the announcement. And hospital stocks including Universal Health [UHS 42.25 3.00 (+7.64%) ], Community Health [CYH 26.85 1.36 (+5.34%) ] and Tenet Healthcare [THC 5.241 0.261 (+5.24%) ] rallied.
But most managed care companies such as Cigna [CI 44.08 -1.32 (-2.91%) ], Wellpoint [WLP 66.04 -3.45 (-4.96%) ] and Aetna [AET 39.71 -1.25 (-3.05%) ] dragged.
Experts were mixed on the announcement.
“The follow-through from this in the next few days and weeks is that more money will come into health care now that the cloud of uncertainty has been lifted,” said Credit Suisse’s Charles Boorady. “And as a country, we’re going to spend about $2 trillion more on health care with this law and that’s all money coming into health care, which will ultimately be good for the managed health care stocks.”
Meanwhile, Barry Knapp of Barclays said public policy uncertainty will continue to rise, putting further damper on business confidence.
“It’s a pretty clear negative,” said Knapp. “Markets were going down anyway and this is just going to be a pretty clear negative catalyst over the next or two as opposed to something to stop the bleeding.”
Adding to negative market sentiment, European leaders meet in Brussels for the two-day summit, with German Chancellor Angela Merkel already stating they must concentrate on fundamental reforms rather than emergency proposals put forward by Italy and Spain to help alleviate their cost of borrowing on the markets.
Merkel refused to discuss the issue of debt burden sharing unless national budget controls across the euro zone are introduced first. (Read More: From Nazi to Terminator, Europe’s Media Target Merkel) Meanwhile, a spokesman for German Finance Minister Wolfgang Schaeuble said that a report that Germany could be willing to move sooner than expected to accept shared liability of euro zone debt was not true.
Italian bond yields spiked to their highest level since December 2011 following 5- and 10-year bond auctions ahead of the summit.
Losses from JPMorgan’s derivatives trades may reach as high as $9 billion, compared to previously reported estimates for $2 billion according to a report in the New York Times.
Separately, Citi analysts have cut second quarter earnings estimates and price targets for JPMorgan, Bank of America, Goldman Sachs, and Morgan Stanley.
Barclays tumbled a day after an investigation found the bank had manipulated key market interest rates over several years. British authorities warned that criminal proceedings could follow.
Wells Fargo resumed its “outperform” rating on Apple [AAPL 566.53 -7.97 (-1.39%) ] and “market perform” rating on Dell [DELL 11.831 -0.499 (-4.05%) ], Hewlett-Packard [HPQ 19.19 -0.32 (-1.64%) ], IBM [IBM 189.89 -3.11 (-1.61%) ] and NetApp [NTAP 29.56 -1.03 (-3.37%) ].
And News Corp [NWSA 21.995 -0.315 (-1.41%) ] formally announced plans to split its entertainment and publishing businesses.
Among earnings, Family Dollar [FDO 66.82 -2.31 (-3.34%) ] slumped after the retailer posted a smaller-than-expected gain in earnings. Research In Motion [RIMM 9.0199 -0.1601 (-1.74%) ], Nike [NKE 96.10 -2.01 (-2.05%) ] and Accenture [ACN 56.25 0.38 (+0.68%) ] are slated to report after the closing bell.
On the economic front, GDP increased at a 1.9 percent annual rate, according to the Commerce Department in its final reading, which was unchanged from its estimate last month and in line with expectations.
And weekly jobless claims fell 6,000 to a seasonally adjusted 386,000, according to the Labor Department. The four-week moving average for new claims slipped 750 to 386,750.
“The reports confirm a weak economy,” said Rex Macey, CIO of Wilmington Trust Investment Advisors. “People are also watching what’s going on in Europe with the summit and expectations have been low. The problems there are big and you’re not going to solve this in a day or two.”
Treasury prices pared some gains after the government auctioned $29 billion in 7-year notes at a high yield of 1.075 percent and bid-to-cover of 2.64.
