Healthcare ETFs Slide as UnitedHealth Plunges

Sumit Roy

Tue, May 13, 2025, 2:30 PM 2 min read

Healthcare stocks plunged connected Tuesday, sharply underperforming the broader marketplace arsenic the nation’s largest wellness insurer tumbled.

The Health Care Select Sector SPDR Fund (XLV) dropped 2.5% by midday, flirting with its lowest level successful much than a twelvemonth and a half. That compares with a 1% summation successful the SPDR S&P 500 ETF Trust (SPY), highlighting the antithetic divergence betwixt healthcare and the broader market.

The catalyst was a stunning 16% driblet successful shares of UnitedHealth Group Inc. (UNH) aft the company’s CEO abruptly resigned for idiosyncratic reasons. UnitedHealth besides withdrew its full-year guidance, citing rising aesculapian costs that are pressuring margins.

It’s the latest stroke for the healthcare giant, which has mislaid 47% of its worth since April 11, a melodramatic autumn for what was a $550 cardinal institution astatine its peak. As of Tuesday, UnitedHealth was worthy $289 billion, inactive making it the third-largest holding successful XLV astatine 7%, down lone Eli Lilly & Co. (LLY) and Johnson & Johnson Inc. (JNJ).

But UnitedHealth’s woes aren’t the lone headwind facing the healthcare sector.

On Monday, President Donald Trump signed an executive order aimed astatine lowering cause prices, putting caller governmental unit connected pharmaceutical companies. XLV managed to summation 2.5% that day, though it lagged down SPY’s 3.3% jump.

Healthcare, agelong seen arsenic a antiaircraft play comparatively insulated from economical swings, is starting to look vulnerable. During the marketplace selloff successful April, erstwhile commercialized warfare concerns dragged SPY down by arsenic overmuch arsenic 15% twelvemonth to date, XLV held up comparatively well, falling conscionable implicit 3%.

But since then, healthcare has lagged sharply. SPY has erased each of its losses and is present up astir 1% connected the year. XLV, by contrast, has failed to retrieve and is threatening to interruption to caller lows.

Healthcare stocks are dealing with a treble whammy: argumentation unit connected pricing that’s impacting cause and security companies, arsenic good arsenic a post-pandemic surge successful request for aesculapian services—particularly among seniors—driving up costs for insurers.

That operation is taking a toll connected margins and capitalist sentiment alike, with much symptom perchance ahead.

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