Stock futures were pointing to a higher open even before Goldman Sachs (NYSE:GS) reported better than expected earnings. Goldman rose 2.25% before the open helping to lead another group of financial stocks that have kicked off a strong earnings season. PNC Financial (NYSE:PNC) and Truist Financial Corp (NYSE:TFC) were among the group of financial stocks that also beat on earnings and revenue estimates. Financials continue to benefit from the rise in yields, but supply chain and inflation problems are likely to be factors as other market sectors begin to report next week.

The Real Estate Select Sector Index ($IXRE) has been able to keep up with the S&P 500 (SPX) despite rising interest rates. On Friday morning, Prologis (NYSE:PLD) reported better-than-expected earnings and revenue leading to a premarket rally of 1.86%. The company saw a record increase in rents and a rise in occupancy.

Trucking company JB Hunt (NASDAQ:JBHT) was 2.8% higher in premarket trading after announcing that it beat estimates on earnings and revenue. The company has benefited from high demand as trucking is a central piece of the supply chain. JB Hunt reported growth in all business segments which helped to offset rising wages and the cost of new trucks. A strong transportation sector is often a good sign for the economy because it’s an indicator of demand.

A couple of stocks are down in premarket trading. Corsair Gaming (NASDAQ:CRSR) fell 5.5% before the open after reducing its third-quarter revenue guidance. The company cited supply chain issues for the lower outlook. Virgin Galactic (NYSE:SPCE) fell 18% because the company had to delay the launch of its commercial space tourism business until next year.

In economic news, the Census Bureau released the monthly U.S. Retail Sales numbers for September on Friday morning which came in much higher than expected. However, the numbers are being driven in part by higher inflation. Stock futures were unchanged immediately after the news.   

Sector Wellness

UnitedHealth Group (NYSE:UNH) climbed more than 4% on Thursday after announcing better-than-expected earnings, but the stock struggled to break a resistance level near $425. UNH has been testing this level since May but has been turned back by sellers. The positive announcement could help the stock eventually break resistance, but weakness in the sector could be a drag on the company.

One problem with the Health Care sector is that COVID-19 and staff shortages are making elective procedures and regular health care more difficult. Last month, The New York Times reported that some hospitals were postponing surgeries for hernias, hip replacements, cancer, and heart surgeries because of the lack of beds. Recently, the Washington Post reported that coronavirus cases are falling, which could allow for more elective procedures.

Despite the falling cases, many news agencies including Newsweek and BBC are reporting hospital staffing shortages, which means that even if rooms and beds are open, there may not be enough staff to help with treatments. Despite these shortages, medical staffing companies’ stock prices have been falling. AMN Healthcare (NYSE:AMN) has fallen more than 17% in the last two days, while Cross Country Healthcare (NASDAQ:CCRN) and Heidrick & Struggles (NASDAQ:HSII) are both down 15% and 6% respectively from their 52-week highs set just four days ago. Yet, there’s no news on what could be driving the sell-off.

The high degree of uncertainty around health care could make it difficult for investors to diagnosis where the sector may be going.  

CHART OF THE DAY: FLATLINING. UnitedHealth (UNH—pink) rallied on its earnings announcement but failed to sustain a break above resistance. One negative factor is the weakness in the S&P Health Care Select Sector Index ($IXV—candlesticks). Health Care is underperforming the S&P 500 (SPX—blue) in both comparative performance and relative strength (green line).

Data Sources: ICE, S&P Dow Jones Indices. Chart source: The thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

Booster Shots: On the positive side of health care, vaccine maker Moderna (NASDAQ:MRNA) received a unanimous recommendation from the FDA advisory committee for its COVID-19 booster shot. The shot is recommended for patients older than 65 or at high risk. The news was a “shot in the arm” for Moderna, which was hit hard when Merck & Co Inc. (NYSE:MRK) released its testing results for its COVID-19 booster. The stock rallied more than 3% on the news but is still down 30% from its August high. Despite its recent struggles, Moderna is up more than 2000% in the last two years.

An FDA panel is expected to meet and discuss a booster shot for the Johnson & Johnson (NYSE:JNJ) vaccine today.

Symbiotic Relationships: Moderna was struggling to stay in business before its COVID-19 vaccine. Now, the stock is part of the S&P 500. The success with its vaccine should give the company the capital it needs to potentially get more of its drugs to market.

Biotech stocks have also been weak despite being a favorite among aggressive growth investors. The Nasdaq Biotech Index (NBI) is trading near where it started the year. Unfortunately, new science and early-stage success doesn’t guarantee FDA approval. Additionally, a small portfolio of drugs provides a lot of risk for biotech companies, or they depend heavily on partnerships with other drug companies. For example, Seagen (NASDAQ:SGEN) creates antibody-drug conjugates used in monoclonal antibodies. The company has three drugs Adcetris, Padcev, and Tukysa. However, Adcetris accounts for the majority of sales that come from a partnership with Takeda Pharmaceuticals (NYSE:TAK) and licensing revenue from Merck.

In a Heartbeat: Despite the weakness in much of the Health Care sector, there appears to be some life in medical device companies. The Dow Jones U.S. Medical Equipment Index ($DJUSAM) bounced off support around the 2830 level on Thursday. The bounce appears to be driven by companies like Stryker Corporation (NYSE:SYK), Becton Dickson (NYSE:BDX), and Medtronic (NYSE:MDT), all of which experienced similar bounces. While there’s little news around the industry group, it’s exhibiting greater relative strength than other industries in the sector.

TD Ameritrade® commentary for educational purposes only. Member SIPC.

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