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* Biden sweeps South in Democratic presidential primaries
* Health insurers surge as Sanders suffers setback
* Indexes up: Dow 2.90%, S&P 2.63%, Nasdaq 2.51% (Updates to early afternoon)
By Medha Singh and Sanjana Shivdas
March 4 (Reuters) - Wall Street rose more than 2.5% on Wednesday, led by healthcare stocks, after Joe Biden overtook Bernie Sanders to become the new front-runner in the race for the Democratic presidential nomination.
Biden's storming sweep of Super Tuesday Democratic primaries mainly in southern states provided some welcome relief to investors who have dumped stocks in one of the worst weeks for financial markets in recent history.
The S&P 500 and the Dow recouped more than half of a nearly 3% slide in the previous session, which was triggered by an emergency interest rate cut by the Federal Reserve that amplified concerns over the impact of the coronavirus outbreak.
However, all three main U.S. indexes remained firmly in correction territory, down nearly 10% from their record highs, with several analysts saying there was more trouble ahead as the outbreak continues to worsen in countries outside China.
Biden's triumph lifted health insurers, which have suffered for months as self-described socialist Sanders and his "Medicare for All" proposal, which would eliminate private health insurance, gained credence.
UnitedHealth Group Inc, Centene Corp, Humana Inc and Cigna Corp surged more than 10%. The broader healthcare index jumped 4.5%, the most among major S&P sectors.
"Today is a Joe Biden relief rally and an awareness that Bernie Sanders may not be the potential threat to the U.S. economy and markets," said Eric Schiffer, chief executive officer of the private equity firm, the Patriarch Organization.
At 1:11 p.m. ET, the Dow Jones Industrial Average was up 752.75 points, or 2.90%, at 26,670.16 and the S&P 500 was up 78.87 points, or 2.63%, at 3,082.24. The Nasdaq Composite was up 217.60 points, or 2.51%, at 8,901.69.
Fears of a global recession and its impact on U.S. corporate earnings this year have knocked $3.1 trillion off the value of major U.S. companies in the past 10 days.
But Thomas Hayes, managing member at Great Hill Capital LLC in New York, said the Fed's cuts would help extend the decade-long economic expansion. "It will take 4-6 months to filter into the economy and we are setting up for a very strong back half of the year," he said.
Traders have fully priced in another 50 basis point interest rate cut by the Fed in its March 17-18 policy meeting, according to CME group's Fed Watch tool.
Rate-sensitive bank stocks were again weak, down 0.4% with the benchmark Treasury 10-year yields holding below 1% on hopes of another rate cut soon.
Dividend-paying utilities, real estate and consumer staples climbed more than 2.7% each.
"Things are going to get a lot worse before they get better," said Schiffer, adding the coronavirus is the single biggest modern threat to global growth since the recession in 2008-09. (Reporting by Medha Singh and Sanjana Shivdas in Bengaluru; Editing by Anil D'Silva, Patrick Graham, Arun Koyyur)