By Chuck Mikolajczak

NEW YORK (Reuters) – Stocks fell on Thursday but pared back sharp losses late in the session on talk of progress by European leaders in easing the region’s debt crisis, while the Supreme Court’s ruling upholding a landmark healthcare law hit large health insurers.

Markets are especially skittish about any shift in expectations for the euro zone as European Union leaders began a two-day summit in Brussels.

“This is a process that is just going to wind on and is going to bring us periodic bouts of volatility in our markets depending on the news flow,” said Matt Kaufler, portfolio manager at Federated Investors in Rochester, New York.

Stocks began lower and losses accelerated after a divided U.S. Supreme Court backed the centerpiece of President Barack Obama’s healthcare overhaul law.

The decision surprised many investors who see the law, which requires that most Americans obtain insurance by 2014 or face a penalty, as a hallmark of a business unfriendly administration.

Shares later pared losses, though major insurers such as Aetna Inc (AET), which face more regulation, ended lower. Other companies reliant on Medicaid, such as Wellcare Health Plans Inc (WCG) rose as their patient rolls are expected to increase.

The Morgan Stanley healthcare payor index (^HMO) added 0.6 percent. Aetna ended down 2.7 percent to $39.85; Wellcare jumped 8.8 percent to $53.98.

“Because it was such an unexpected result from the Supreme Court today you knew the market had to have at least a short-term violent reaction,” said Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis. For more visit: Yahoo Finance

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