Health care sector provides Wall St tonic gains

US stocks clung on to their gains on Friday during a choppy trading session as rises in healthcare stocks took equities to their best weekly performance since November.

Merck, the pharmaceutical company, gained 12.7 per cent to $27.07 after Bernstein upgraded the company to “outperform”, saying it had agreed a “very fair price” for rival Schering-Plough. Schering-Plough also gained, rising 8.5 per cent to $24.21.

Humana , the health insurer, also gained on speculation reported by Bloomberg that it was the subject of a takeover bid. Its shares rose 7.7 per cent to $24.83.

But CV Therapeutics lost ground after Japan’s Astellas said it might not re-bid for the company after it accepted a rival bid from Gilead Sciences. CV lost 1.8 per cent to $20.67.

The financial sector finished in positive territory as gains in the banking sector outweighed fears over bad debts in the credit card market. Banks received a boost after Richard Parsons, the chairman of Citigroup, said the bank would not need more capital injections from government, further allaying fears of nationalisation. Citi gained 6.6 per cent to $1.78, and JPMorgan picked up 2.4 per cent to $23.75.

But credit card companies Discover Financial and Capital One both lost out, the latter after announcing a change to executives’ compensation schemes that will convert cash bonuses and equity incentives into salary and restricted stock. Discover fell 5.9 per cent to $6.23 and Capital One lost 5.6 per cent to $12.56.

The benchmark S&P 500 index and the Dow Jones Industrial Average both gained 0.8 per cent to 756.55 points and 7,223.98 points respectively. The Nasdaq Composite index was up 0.4 per cent at 1,431.5 points. The gains followed a surge on Thursday after Ken Lewis, chief executive of Bank of America, became the third leading bank boss to say his company had been profitable for the first two months of 2009.

The market was given a boost late on Thursday when President Barack Obama said he would be willing to consider lowering the corporate tax rate if people within business helped him to close tax loopholes.

The energy sector put pressure on the S&P after OPEC cut its forecast for oil demand, with Chevron losing 0.8 per cent to $62.91.

Palm was one of the biggest gainers after RBC Capital Markets upgraded the cellphone manufacturer to outperform from sector perform, based on its plans to dominate the smartphone market. Its shares lifted 6.7 per cent to $8.39.

It was not all good news for technology stocks, as National Semiconductor, the chipmaker, was downgraded to junk status by Standard & Poor’s, the rating agency. The company lost 8.8 per cent to $10.05.

Warren Buffett spent Monday talking up the stocks he holds, but his company remains too exposed to losses on its portfolio, says Fitch, which cut Berkshire Hathaway’s AAA rating. Shares then fell 3.2 per cent.