Investors are losing faith in the economy's ability to withstand a possible recession, and that has taken a bite out of the stock market over the past couple of days. After seeing share prices fall sharply on Thursday, the Nasdaq Composite (^IXIC -2.77%) was down again in midday trading Friday, falling about 1%.

Investors often deal with situations in which news lifts an entire industry higher or lower. Yet it's important to remember that companies are often in direct competition with each other, and what's good news for one can be bad news for others. That fact was particularly clear among healthcare stocks  Guardant Health (GH -3.78%) and Exact Sciences (EXAS -0.60%) on Friday, as the two Nasdaq stocks moved in different directions after a key report.

Guardant doesn't pass investors' test

Shares of Guardant Health had plunged 30% around midday on Friday. The move lower came after the company announced study results for its testing product for colorectal cancer, and even though Guardant seemed to view the outcome as favorable, shareholders didn't agree.

Guardant said that its Eclipse study of more than 20,000 patients who used its blood test for detecting colorectal cancer in adults with average risk factors demonstrated 83% sensitivity in disease detection. In addition, the test detected 13% of advanced adenomas, which are precursors to a cancerous outbreak. The blood test had a specificity of 90% in individuals without advanced neoplasia, as well as in those individuals who had a negative result from a colonoscopy.

Based on the results, which Guardant asserts exceed performance criteria from the Medicare and Medicaid programs for reimbursement, the company plans to complete a submission to the Food and Drug Administration for approval in the first quarter of 2023.

The potential market for Guardant is huge. Screening rates for colorectal cancer remain far below the Centers for Disease Control and Prevention's 80% benchmark, with more than 49 million eligible people remaining unscreened. By offering a test that requires only a simple blood draw, Guardant believes it can boost those screening rates and help fight colorectal cancer more effectively.

A big win for a competing product

In Guardant shareholders' eyes, though, the problem with the results was that they failed to exceed the efficacy rates of a competing test product. That's what sent Exact Sciences stock higher by nearly 20%, as investors recognized the value of its own test.

Exact Sciences is the company behind Cologuard, which is a stool-based colorectal cancer test. Cologuard has shown higher rates of identifying both cancer and pre-cancerous conditions, with 92% sensitivity for patients with cancer and 42% detection of pre-cancerous polyps.

Although there will undoubtedly be some patients who prefer a blood-based test to a stool-based test, higher detection rates will be the primary draw for most test users, as early detection can make a huge difference in survival rates.

Despite the relative benefits of its Cologuard tests, Exact Sciences has struggled. Growth rates slowed dramatically in 2021, and the company is losing considerable amounts of money. In its most recent quarterly results, Exact Sciences said that it expects to see positive adjusted pre-tax operating earnings by late 2023, which is earlier than the previous 2024 target. Even with today's gains, the stock is still down about 30% from the beginning of the year.

In the long run, both Guardant and Exact Sciences have the opportunity to serve a massive addressable market and help save lives. Yet as the two companies duke it out in a key market, investors can expect their shares to move back and forth as they vie for supremacy.