Key Highlights

● Merck beat third-quarter Revenue and adjusted Earnings estimates before the opening bell.

● The drugmaker raised its full-year profit outlook despite licensing charges.

● Winrevair sales nearly doubled from a year earlier.

● Health care was the best-performing S&P 500 sector as the Dow slipped 132.54 points.

Merck (NYSE:MRK) topped third-quarter expectations and lifted its full-year profit forecast, powering to the top of the Dow's leaderboard as health care led the market.

Top of the Dow

On a day when the Dow Jones Industrial Average slipped 132.54 points to 52,342.56, Merck was the bright spot. The stock jumped to lead the Blue-Chip index's gainers, according to a market headline, as investors rewarded a clean beat-and-raise quarter.

Merck reported before the opening bell on Thursday, October 29. Both revenue and adjusted Earnings Per Share topped analysts' estimates, and the drugmaker raised its full-year profit outlook even after absorbing licensing charges. Reports differed on the exact size of the gain as the day wore on, but every measure showed a strong advance.

What drove the quarter

Two products did much of the heavy lifting. Keytruda, Merck's flagship cancer immunotherapy, remained the cornerstone of the business, with contributions now including its subcutaneous version. Winrevair, a treatment for pulmonary arterial hypertension, saw sales nearly double from a year earlier.

That combination matters. Investors have long watched for signs that Merck can build growth drivers beyond Keytruda, and Winrevair's rapid ramp offered evidence of a broadening portfolio. Raising guidance while taking on licensing costs also signalled confidence in the underlying business.

Health care takes the lead

Merck's rally was part of a broader surge in health care. The sector was the best performer in the S&P 500 on Thursday, and the pharma ETF IHE outpaced the health care sector fund at midday, according to market data. Eli Lilly (NYSE:LLY) provided the other big boost, closing at an all-time high of $1,373.70 after reporting third-quarter revenue of $24.40 billion and raising its 2026 revenue guidance to $91 billion to $92 billion.

One report noted that investors rotated into health care, financials and real estate, which limited the damage to the major indexes. That rotation was a theme of the entire session. The Nasdaq Composite tumbled 365.13 points to 26,184.72 on Alphabet (NASDAQ:GOOGL)'s historic plunge, while the Russell 2000 gained 28.71 points.

"Money is rotating within the market rather than leaving it," one market strategist said.

A strong economy backdrop

The day's economic data added a layer of context. Third-quarter GDP grew faster than expected, accelerating from the second quarter, while September PCE Inflation ran hot. Those numbers kept expectations for a December rate hike elevated. In an environment where the Federal Reserve may keep tightening, investors often favour companies with steady earnings and visible growth, a profile that fits large pharmaceutical firms like Merck.

The broader earnings season has been strong too. According to market data, a large majority of S&P 500 companies that have reported so far beat expectations.

Why a raise matters now

Guidance raises carry extra weight late in the year, because they give investors a clearer picture of how the full year will end and a starting point for next year. Merck's decision to lift its profit outlook, rather than merely reaffirm it, set it apart in a market that has punished companies whose forecasts disappoint, as Intel (NASDAQ:INTC) and Amazon (NASDAQ:AMZN) discovered after hours.

What to watch

Watch whether Merck holds its gains on Friday, October 30, when AbbVie (NYSE:ABBV) reports and offers another read on big pharma. Investors will also be listening for more detail on Winrevair's trajectory and on how the subcutaneous version of Keytruda is being adopted. Friday's Employment Cost index could move rate expectations, which in turn could influence whether the rotation into defensive sectors like health care continues.