Healthcare stocks got a solid boost late Thursday as two of the sector's biggest names delivered better-than-expected third-quarter results. Eli Lilly and Merck both beat Wall Street's estimates, pushing the NYSE Healthcare Index and the Health Care Select Sector SPDR Fund (XLV) up about 2%.
This was a classic “big pharma leads” session. Eli Lilly rose 6.4% and Merck climbed 4.5% after investors rewarded strong demand for key medicines and a quarter that wasn't as bad as feared. The gains were enough to lift the entire sector's benchmarks, even though the rally wasn't broad across all healthcare stocks.
Why the sector benchmarks moved
Both the NYSE Healthcare Index and XLV are market-cap weighted, meaning the largest companies have the biggest influence on the index's daily move. When mega-cap drugmakers like Eli Lilly and Merck jump on earnings, they can do much of the heavy lifting for the whole sector's return.
That's why Thursday's split matters. While XLV and the NYSE Healthcare Index rose around 2%, the iShares Biotechnology ETF (IBB), which leans more toward smaller and mid-sized biotech firms, was basically flat, up just 0.1%. In other words, “healthcare was up” was a cleaner signal about big pharma strength than about biotech breadth.
The biotech space showed its strength more in one-off reactions than in the benchmark itself. For example, Glaukos, a medical device maker focused on glaucoma, surged 32% after beating expectations and lifting its 2026 revenue outlook. That kind of move is company-specific, not a sign of broad biotech momentum.
Other notable movers
Beyond the big pharma names, a few other healthcare companies made headlines on their own news.
- Glaukos jumped 32% after raising its 2026 revenue outlook, a sign that demand for its glaucoma treatments is stronger than expected.
- Perrigo, a consumer health company, edged up 0.4% after agreeing to sell its infant formula unit to MeridianMade for up to $175 million. The deal is part of Perrigo's effort to streamline its business.
- Novavax added 1.1% after receiving a $125 million milestone payment linked to a Sanofi Phase 3 trial for a combined flu and COVID-19 shot that uses Novavax's Nuvaxovid technology. The payment is a positive sign for the vaccine maker's partnership with Sanofi.
What it means for investors
For everyday investors, Thursday's move is a reminder that sector ETFs can be heavily influenced by a handful of mega-cap stocks. When you see a headline like “healthcare stocks rise 2%,” it's worth checking whether the gain is broad-based or driven by a few large companies.
In this case, the rally was concentrated in big pharma. Eli Lilly and Merck are two of the largest drugmakers in the world, and their earnings beats were enough to move the entire sector. But the biotech-heavy IBB barely moved, suggesting that smaller biotech companies didn't share in the gains.
That doesn't mean the news was bad for biotech investors. Glaukos' surge shows that company-specific catalysts can still drive big moves. But it does mean that a sector-wide rally isn't always what it seems.
For those watching the healthcare sector, the key takeaway is to look beneath the surface. A 2% move in XLV might feel like a broad rally, but it can be the result of just a few large stocks. Understanding how index construction works can help you interpret daily market moves more accurately.
Looking ahead, investors will likely keep an eye on whether Eli Lilly and Merck can sustain their momentum, and whether other drugmakers follow with strong quarters. The healthcare sector has been a mixed bag this earnings season, with some companies beating expectations and others falling short. Thursday's action suggests that big pharma, at least, is holding up well.
For more on how earnings are moving markets, check out our coverage of European stocks hitting a two-month high and energy stocks staying steady on Shell and Cheniere earnings.
