ETF Shake-Up: UNH's Meltdown Meets LLY's Moonshot

Three healthcare-themed ETFs were in sharp spotlight Thursday as the sector got through a wild trading day, fueled by UnitedHealth’s (NYSE:UNH) earnings disappointment and steep stock decline. While insurers weighed down on broad healthcare gauges, a drugmakers rally, led by Eli Lilly (NYSE:LLY), limited the damage.

Also Read: UnitedHealth CEO Says High Cost Of US Health Care ‘Simply Not Sustainable’

ETFs In Spotlight

Health Care Select Sector SPDR Fund (NYSE:XLV)

1-Day Return (Thursday): -0.6%

Top holdings of this fund are Eli Lilly, UnitedHealth, Johnson & Johnson (NYSE:JNJ). UnitedHealth dropped 2.4%, spooking XLV early in the session. The ETF trimmed losses, however, as Eli Lilly rallied 14.3% on good weight-loss pill trial news, calling out the group’s internal divergency. Barring Thursday’s turmoil, though, XLV is off just 1.5% for the year so far and commands a 17x forward-earnings multiple—below its five-year history and the large-cap S&P 500’s 20x multiple, according to Barron’s.

iShares U.S. Pharmaceuticals ETF (NYSE:IHE)

1-Day Performance: +4.6%

IHE surged as investors rotated into large-cap pharma stocks, bolstered by Eli Lilly's rally. The gains came despite a nearly 8% drop in Novo Nordisk (NYSE:NVO), Lilly's rival in the GLP-1 space.

SPDR S&P Pharmaceuticals ETF (NYSE:XPH)

1-Day Performance: +2.15%

XPH tracked gains across a broader basket of pharmaceutical names, benefiting from bullish sentiment on drugmakers following Lilly's breakthrough.

Market Context: A Sector Of Contrasts

UnitedHealth’s poor earnings and soft guidance spooked healthcare investors, highlighting how exposed insurers are to firm-specific disappointments and policy-level risks. The 22% decline in the stock not only heavily burdened XLV—where it is the second-largest position—but pulled down peers CVS Health (NYSE:CVS), Humana (NYSE:HUM), and Elevance Health (NYSE:ELV) too.

However, the overall message of the day was one of subtlety and not panic. Eli Lilly’s explosion proved the influence of innovation in developing market-driving catalysts within the health-care sector. It provided the stimulus that helped neutralize weakness within managed care and indicated how investors in ETFs are able to still uncover segments of strength despite sector-wide selloffs.

At the same time, Johnson & Johnson kept its steady pace going with the help of strong earnings.

Device and medical equipment manufacturers like Medtronic (NYSE:MDT), Zimmer Biomet (NYSE:ZBH), and Stryker (NYSE:SYK) are also attracting investor attention as Wall Street is wagering on secular demand from the aging population.

Takeaway

The health care industry remains far from monolithic. Thursday’s ETF action underscored the increasing divide between pressured insurers and pharma names benefiting from innovation tailwinds. For investors in ETFs, the message is simple: thematic selectivity is key. Though political headlines and earnings fluctuations might continue to shock portions of the industry, solid fundamentals within pharma and medtech imply there’s still ample healthy opportunity to go around.

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