While you were sleeping: Wall St plunges as Amazon shakes up US healthcare

Wall Street plunged for a second day, as did US Treasuries, as investors reassessed stock valuations and worried over rising bond yields.

In particular, plans by Amazon, Berkshire Hathaway and JPMorgan Chase to form a new healthcare company weighed on the industry's shares.

At the close of trading in New York, the Dow Jones Industrial Average plummeted 362.59 points, or 1.4%, to 26,076.89, its steepest fall since August 2017. 

The Nasdaq Composite Index shed 0.9% to 7402.48 and the Standard & Poor's 500 Index slid 1.1% to 2822.43.

"It clearly is a worldwide reaction as investors have maybe started to take notice of how much the valuations have come up," Peter Jankovskis, co-chief investment officer of Lisle, Illinois-based Oakbrook Investments, told Bloomberg.

"It's very clear that this particular bout of selling is originating overseas."

Bond yields go higher
US Treasuries also declined, sending the yield on the 10-year note two basis points higher to 2.725%, up from 2.69% on Monday and the highest in nearly four years.

The Dow retreated, led by declines in shares of Pfizer and those of UnitedHealth Group, down 4.3% and 4.4% respectively.

Only Procter & Gamble and American Express posted minimal gains.

Healthcare stocks fell. Amazon, Berkshire and JPMorgan are partnering on ways to address healthcare for their US employees, with the aim of improving employee satisfaction and reducing costs, the companies said in a joint statement.

"The ballooning costs of healthcare act as a hungry tapeworm on the American economy," Berkshire CEO Warren Buffett said in the statement. "Our group does not come to this problem with answers. But we also do not accept it as inevitable."

And they are looking beyond their own employees.

"The three of our companies have extraordinary resources, and our goal is to create solutions that benefit our US employees, their families and, potentially, all Americans," JPMorgan CEO Jamie Dimon said.

The new independent healthcare company will be free from profit-making incentives and constraints, focusing on technology solutions to provide simplified, high-quality and transparent healthcare at a reasonable cost, the three companies said.

"Investors have continually asked what unexpected development might spoil the strong investor sentiment towards managed care," BMO Capital Markets analyst Matt Borsch said in a research note, Reuters reported. "Unfortunately, this seems tailor-made to fit the bill."

McDonald's feels the heat
Shares of McDonald's also slid, even as the fast-food chain reported quarterly profit that exceeded analysts' expectations, bolstered by appetite for its new Buttermilk Crispy Tenders and McPick 2 menu items.

Global comparable sales climbed 5.5% in the quarter ended December 31, while those in the US increased 4.5%, McDonald's said in a statement.

Excluding the impact of tax changes, the company reported $US1.71 diluted earnings per share in the fourth quarter. That surpassed the $US1.59 analysts on average had expected, according to Reuters.

"McDonald's positive global comparable sales performance in its recent quarter and full year 2017, driven in-part by positive guest counts in all segments, is a good indicator that the company's various initiatives are continuing to take hold and resonating well with consumers," Moody's analyst Bill Fahy, told CNBC via email.

The stock, which has soared about 45% in the past year, traded 3.7% weaker.

"Momentum slowed a little bit in the fourth quarter on a two-year basis," Bloomberg Intelligence analyst Mike Halen said. "The stock is down because it's been on an absolute tear. Stocks don't go up forever."

Federal Reserve policy makers began their final two-day policy meeting chaired by Janet Yellen, while US President Donald Trump is scheduled to deliver his first State of the Union address later in the day.

In Europe, the Stoxx 600 Index shed 0.9%. France's CAC40 Index also fell 0.9%, Germany's DAX Index gave up 1% the UK's FTSE 100 index dropped 1.1%.

(BusinessDesk)