Markets Trade Flat as Earnings Week Begins; CMS Payment Proposal Sends Insurer Stocks Reeling

Markets opened cautiously positive on optimism around a heavy slate of corporate earnings, with large-cap technology names supporting modest gains in the regular session even as futures showed mixed direction. The session’s calm was shattered in extended trading after the Centers for Medicare & Medicaid Services released a proposal that would leave Medicare Advantage payments largely unchanged for 2027, with a net average increase of about 0.09%. CMS said the move is intended to correct payment inaccuracies and modernize how risk is measured, and estimated the proposed rates would translate to slightly more than $700 million in additional payments to plans next year. That figure was far below Wall Street expectations of a multi-percentage-point boost, prompting investors to reprice Medicare-dependent insurers quickly: Humana, CVS Health and UnitedHealth were among the largest decliners in after-hours trade, with double-digit and high-single-digit drops for some names. The concentrated selloff reflected immediate recalibration of revenue and margin assumptions for carriers that rely heavily on government-set rates and risk-adjustment mechanics. Broad-market benchmarks nevertheless finished the regular session with modest gains — the S&P 500 and Nasdaq rose while the Dow climbed more than 300 points — buoyed by firms that have already reported upbeat earnings. About three-quarters of S&P 500 companies that have reported so far have beaten expectations, underscoring the earnings-driven support for equities even as sector-specific shocks emerge. Policymakers’ action on Medicare payments introduced another vector of uncertainty: final rulemaking is expected in early April, leaving insurers a narrow window to adjust pricing, network strategies and benefit designs ahead of implementation. Analysts said carriers facing plans built around a larger assumed rate increase may be forced into cost controls, benefit trade-offs or re-examined guidance in upcoming earnings calls. The Federal Reserve meeting this week remains a parallel focus for investors, with policy expected to be left unchanged at a 3.50%–3.75% target and futures still pricing modest easing later in 2026. For portfolio managers, the episode is a reminder that concentrated regulatory announcements can produce abrupt sector rotations and materially change near-term outlooks for regulated businesses, even while the broader market narrative remains constructive heading into earnings season.