Stocks gained on Thursday, with the Dow Jones Industrial Average (DJINDICES:^DJI) closing up and the S&P 500 (SNPINDEX:^GSPC) setting a new record.

Today's stock market

Index Percentage Change Point Change
Dow 0.18% 40.49
S&P 500 0.12% 3.02

Data source: Yahoo! Finance.

Homebuilders climbed in advance of some earnings announcements, and the iShares US Home Construction ETF (NYSEMKT:ITB) rose 1.3%. Small-cap stocks rose again, with the iShares Russell 2000 ETF (NYSEMKT:IWM) closing up 0.3% to a record high.

As for individual stocks, DexCom (NASDAQ:DXCM) plummeted on news from a big competitor, and Rite Aid (NYSE:RAD) disappointed investors once again.

Stock graph and prices.

Image source: Getty Images.

DexCom gets crushed on news of competition

Shares of diabetes monitor maker DexCom got whacked by 32.7% today after medical products giant Abbott Laboratories announced that the FDA has approved its continuous glucose monitor (CGM) that requires no finger pricks, a first in the market. Abbott's stock rose 2.9% on the news.

Abbott's device, called FreeStyle Libre, uses a sensor about the size of two stacked quarters that attaches to the back of the arm and passes blood glucose data wirelessly to a receiver that tracks glucose levels minute by minute. DexCom sells a similar system, but it requires two finger pricks per day for calibration. The freedom from needing to take blood samples could be a game changer for the 30 million people with diabetes in America. Abbott plans to sell the device at all major retail pharmacies before the end of the year, and likely at a lower price than the DexCom system.

DexCom has had a head start in the CGM market in the U.S., with an 18% jump in domestic revenue in the most recent quarter. It also won a positive reimbursement decision from Medicare, which will start augmenting sales in the current quarter. What's more, DexCom has already been competing against FreeStyle Libre outside the U.S., where the device is being sold in 40 countries. DexCom's international sales rose 69% last quarter, and in the last conference call, a DexCom executive said that when the devices are reimbursed and therefore the lower cost of Abbott's product is not a factor, patients have been switching from the Libre to DexCom's device because of higher accuracy. But investors are clearly concerned that Abbott's marketing clout and the convenience of FreeStyle Libre will ultimately trump any other advantages DexCom may have.

Rite Aid continues to struggle

Struggling pharmacy chain Rite Aid reported its fiscal second-quarter results today, and investors did not like what they heard, sending the stock down 11%. While the company has recently received regulatory approval to sell 1,932 of its 4,507 stores to Walgreens Boots Alliance (NASDAQ:WBA), the company is already shrinking on its own, reporting a revenue decline of 4.4% to $7.7 billion, and an adjusted net loss of $0.01 per share, compared with a per-share profit of $0.03 in the period a year earlier.

Same-store sales decreased 3.4%, reflecting a 4.6% decline in pharmacy sales and a 0.9% drop in front-end sales. The contraction in pharmacy sales was blamed on the negative impact of generic drug introductions and a 1.8% fall in the number of prescriptions filled, due in part to exclusion from pharmacy networks that the company had participated in previously. 

It's hard to imagine things getting much worse for Rite Aid's shareholders, who have seen the stock lose 75% of its value in 2017. The store sale to Walgreens for $4.375 billion in cash will allow the company to pay off a good chunk of its $7 billion in debt and help it get back to profitability. But given that Walgreens will be picking up stores with the least competitive exposure to its existing store base, leaving Rite Aid with stores most threatened by the now-stronger competitor, there are still more questions than answers about the future of the company.

Jim Crumly has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.