XLV Wobbles as UnitedHealthcare CEO is Shot and Killed

UnitedHealthcare CEO Brian Thompson was shot and killed outside a Manhattan hotel early Wednesday morning in what authorities are investigating as a targeted attack, causing the company's stock price to ripple along with ETFs that include the shares.  

The incident has shocked the healthcare and financial industries, as Thompson—who was the CEO Of UnitedHealth Group's health benefits unit—played a pivotal role in shaping the healthcare insurance leader’s strategic direction. 

Upheaval in a company's leadership often roils a company's stock price since investors typically shy away from uncertainty. Still, sudden deaths have frequently sparked rallies in a company's stock, Quartz reported in 2016. 

Shares of UNH were initially volatile following the news, rising 2% in pre-market trading but giving up half those gains as the morning progressed, amid concerns about potential leadership disruptions. The Health Care Select Sector SPDR Fund ETF (XLV), which includes UNH stock as the number two holding with a 10% weighting, was down 0.1% early morning but rose 0.5% by midday. 

XLV’s late morning rise can be partially attributed to news from the fund’s top holding, Eli Lilly (LLY), as the leading pharmaceutical company reported that its blockbuster weight-loss drug Zepbound helped patients shed more pounds than rival Novo Nordisk’s Wegovy. 

Thompson was shot in the chest by a masked man just outside the Hilton Hotel around 6:46 am local time, the New York Post reported. The alleged assailant then fled down 6th Ave. and had not been captured by the time markets opened for trading. 

Thompson was at the hotel as the health insurer's annual investor conference was slated to start at 8:00 am. He joined UnitedHealth Group in 2024 and became CEO of the UnitedHealthcare benefits division in April 2021. He was 50. 

The broader corporate CEO Andrew Witty was unharmed and the company's investor day has been cancelled. 

XLV, Healthcare Stocks Are Lagging the S&P 500 in 2024

While XLV is up a respectable 8% year-to-date, the largest healthcare ETF still lags behind most other sectors in a year when the broader stock market is up 28%, as measured by the SPDR S&P 500 ETF Trust (SPY). Leading sectors include financials (up 34%), utilities (up 27%), consumer discretionary (up 25%), and technology (up 23%). 

The healthcare sector, as represented by the XLV ETF, is underperforming the S&P 500 in 2024 due to several factors, including rising operational costs from inflation and labor shortages, weaker-than-expected earnings from key sector players, and regulatory uncertainties in drug pricing and healthcare policy in a forthcoming Trump administration. 

Additionally, the broader rotation into growth sectors like technology and consumer discretionary, driven by moderating interest rates, has diverted investor attention away from defensive sectors like healthcare. Concerns over reduced Medicare Advantage reimbursements have also weighed on sentiment for health insurers.