MARKETS
Stocks surge on health-insurer gains

U.S. stocks rose Monday, with the Standard & Poor’s 500-stock index hitting a record intraday high, helped by gains in health insurers’ shares and optimism about merger activity.

The Nasdaq reached a 14-year high, though all three indexes closed off their highs for the day, with the S&P 500 finishing less than a point away from its record close of 1,848.38.

Humana and UnitedHealth Group ranked among the S&P 500’s biggest percentage gainers, with Humana’s stock jumping 10.6 percent, to $113.69, after the company said that the government’s proposed cuts to the private Medicare program appeared to be less than it had forecast. UnitedHealth shares rose 3 percent, to $76.01.

Aetna rose 2 percent to close at $71.80 after giving a 2014 earnings outlook.

Weak recent economic data have largely been blamed on harsh winter weather, which has kept investors hopeful that the pickup in the economy remains intact. The latest data showed that the Chicago Fed National Activity index fell to minus-0.39 in January from 0.16 in December, while financial data firm Markit’s preliminary February reading on the services sector fell to 52.7 from 56.7.

— Reuters

BANKRUPTCY
Fitch troubled by Detroit debt plan

Detroit’s plan to deal with its $18 billion of debt and emerge from municipal bankruptcy would set a troubling precedent for the U.S. municipal bond market, Fitch Ratings said Monday.

Under the plan Detroit filed in U.S. Bankruptcy Court on Friday, owners of certain general-obligation (GO) bonds would take an 80 percent haircut on their investments.

The city’s two pension funds, meanwhile, would see higher recovery rates, aided by pledges worth about $830 million from philanthropic foundations, the Detroit Institute of Art and Michigan Gov. Rick Snyder (R), who must win legislative approval for the state’s $350 million share.

“Fitch considers Detroit’s plan of adjustment to be hostile to GO bondholders,” the rating agency said. “If this priority of creditors is upheld, Fitch expects that this disregard for the rights of bondholders will factor into higher borrowing costs for local issuers, and ultimately for local property taxpayers, in Michigan.”

The rating agency took particular issue with the treatment of voter-approved unlimited-tax GO bonds as unsecured. Insurance companies that guaranteed debt service payments on those bonds have sued the city over this treatment.

Judge Steven Rhodes, who is overseeing Detroit’s bankruptcy case, said last week that he would rule on the matter in two to three weeks but urged the insurers and the city to settle their dispute before that.

— Reuters

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