Investors use stock market sectors to inform important trading decisions. Diversifying your portfolio among all 11 sectors of the stock market can mitigate volatility. If one sector endures a tough time, winning stocks in other sectors can balance your temporary losses.
Being aware of the stock market sectors today can help you set up trading strategies, align with market trends, and work the economic cycles to build success. In this post, Gorilla Trades takes a closer look at these 11 sectors and what kinds of companies make up each one.
What Are Stock Market Sectors?
Stock market sectors are composed of companies that work in the same industry or share similar business activities. Classifying businesses in the 11 stock market sectors lets investors find, compare, and contrast businesses with traditional economic drivers.
Sectors give stock watchers a clear impression of how different parts of the stock market perform. This method of organization lets investors analyze trends and identify risks, leading to more informed decisions about how they will distribute their investment capital.
Here’s a brief overview of the 11 stock market sectors, what they cover, and what kinds of companies align with each one.
1. Information Technology
Information technology (IT) is the dominant sector in the S&P 500 as of mid-2024. IT companies produce, distribute, or provide services linked to software, hardware, and technology. The sector is driven by innovation and efficiency, especially since technological breakthroughs increasingly happen at a fast clip.
IT’s primary areas include software development, building hardware, subcontracted IT services, and consulting. Some of the major players in the IT sector include:
- Apple (NASDAQ: AAPL)
- Microsoft (NASDAQ: MSFT)
- Nvidia (NASDAQ: NVDA)
- Intel (NASDAQ: INTC)
- IBM (NYSE: IBM)
As of August 2024, the market cap of the IT sector is around $18.1 trillion.
2. Health Care
The health care sector includes companies in biotech, medical devices, pharmaceuticals, and various health services. As with IT, innovation is a key driver of health care, along with research and care delivery. Businesses in health care focus on a broad range of operations, including drug development, biotech research, and delivering care to patients.
The health care sector is one of the more active sectors on the stock market, as advancement and innovation are key benchmarks for these companies. Major health care stocks include:
- Johnson & Johnson (NYSE: JNJ)
- Pfizer (NYSE: PFE)
- Merck & Co. (NYSE: MRK)
- Abbott Laboratories (NYSE: ABT)
- UnitedHealth Group (NYSE: UNH)
The overall market cap for health care is just over $7 trillion.
3. Financials
Companies in the financials sector offer a number of financial services such as banking, investment management, and insurance. It also contains certain real estate services like REITs and mortgage lending (not property sales or management).
The financials sector is highly essential to keep the economy functional. Financial businesses help move transactions along, oversee investments, and make financial products (ETFs, retirement accounts, credit lines, etc.). Common drivers of the financials sector include regulatory changes, the economic cycle, and interest rates. Big players in this sector include:
- JPMorgan Chase (NYSE: JPM)
- Bank of America (NYSE: BAC)
- Wells Fargo (NYSE: WFC)
- Goldman Sachs (NYSE: GS)
- Morgan Stanley (NYSE: MS)
- The overall sector’s current market cap is around $10 trillion.
4. Consumer Staples
Consumer staples (also called consumer defensive) covers companies that make or sell goods that always sell regardless of economic conditions: food and beverages, household items, and personal care products.
The consumer staples sector is one of the more stable categories in the stock market. Its biggest companies are established corporations with high brand recognition, sophisticated distribution, and consistent performance. Key performers in this sector are:
- Procter & Gamble (NYSE: PG)
- Coca-Cola (NYSE: KO)
- PepsiCo (NASDAQ: PEP)
- Nestlé (OTC: NSRGY)
- Colgate-Palmolive (NYSE: CL)
- As of August 2024, the consumer staples market cap is about $3.5 trillion.
5. Consumer Discretionary
The other consumer sector is discretionary (alternately called consumer cyclical). It includes companies that make or sell goods or services that are considered non-essential. These include cars, vacations, entertainment, and leisure purchases.
Consumer discretionary is far more volatile than staples since these companies depend on current economic conditions and consumer sentiment. They tend to outperform during bull markets but may struggle during downturns. Big companies in this sector include:
- Amazon (NASDAQ: AMZN)
- Tesla (NASDAQ: TSLA)
- Walt Disney (NYSE: DIS)
- Nike (NYSE: NKE)
- Starbucks (NASDAQ: SBUX)
The consumer discretionary market cap as of August 2024 is more than $6.5 trillion.
6. Communications
The communications sector features companies involved in information exchange and connectivity. Its key players provide services in media, telecommunication, and entertainment. They can include internet providers, phone companies, digital media, and content creation.
The sector is also driven by innovation and trends in the marketplace. Streaming services have revolutionized the sector, although its companies still hold on to traditional providers. Some of the top comms companies include:
- Alphabet (NASDAQ: GOOGL)
- Verizon Communications (NYSE: VZ)
- AT&T (NYSE: T)
- Netflix (NASDAQ: NFLX)
- Comcast (NASDAQ: CMCSA)
The August 2024 market cap for this sector is around $5.4 trillion.
7. Industrials
The industrial sector contains construction companies, manufacturers, and services supporting transportation and infrastructure. Industrial companies provide services to stimulate economic activity and manufacture and distribute certain goods.
Industries that might fall into this sector include machinery, transportation, defense, aerospace, and engineering. Economic expansion and the distribution of capital are two of the factors that drive success in industrials.
Some of the best-known companies in the industrials sector include:
- Boeing (NYSE: BA)
- Caterpillar (NYSE: CAT)
- Honeywell (NASDAQ: HON)
- Union Pacific (NYSE: UNP)
- 3M (NYSE: MMM)
The industrials market cap is about $5 trillion.
8. Energy
Companies in the energy sector produce, distribute, and manage sources of energy. Products and services in this sector include oil, coal, natural gas, and sustainable energy. The energy sector is especially critical as companies rely on it to keep their homes, businesses, and transportation up and running.
The energy sector covers extraction, refinement, and energy production. The industry is affected by global prices and geopolitical factors, possibly more than any other sector. Top companies include:
- ExxonMobil (NYSE: XOM)
- Chevron (NYSE: CVX)
- ConocoPhillips (NYSE: COP)
- BP (NYSE: BP)
- TotalEnergies (NYSE: TTE)
The market cap for energy is about $3 trillion.
9. Utilities
This sector includes companies that provide essential services like electricity, natural gas, and water. Most utility companies are overseen by the federal government since they chiefly operate as public works, including power generation, water services, and sewage treatment.
The utilities sector is considered stable because the demand for utility services is consistent. Top companies include:
- NextEra Energy (NYSE: NEE)
- Duke Energy (NYSE: DUK)
- Southern Company (NYSE: SO)
- Dominion Energy (NYSE: D)
- Xcel Energy (NASDAQ: XEL)
The market cap for utilities in August 2024 is just under $1.5 trillion.
10. Real Estate
The real estate sector includes companies that concentrate on owning, developing, and managing properties, including residential, commercial, and industrial sites. Real estate businesses focus on services like property development, leasing, and investing through real estate investment trusts (REITs).
Rental demand, economic conditions, and financial growth drive the real estate sector, whose major companies include:
- Simon Property Group (NYSE: SPG)
- Digital Realty Trust (NYSE: DLR)
- Prologis (NYSE: PLD)
- Boston Properties (NYSE: BXP)
The market cap in real estate is just north of $1.65 trillion in August 2024.
11. Materials
Finally, the materials sector focuses on processing raw materials used in various industries. Materials industries include companies working in mining, metals, chemicals, lumber, and more. The sector is driven by economic factors, prices, and especially supply chain conditions.
This sector is highly dependent on economic growth in construction and large-scale manufacturing. Materials companies include:
- Dow Inc. (NYSE: DOW)
- DuPont (NYSE: DD)
- BHP Group (NYSE: BHP)
- Rio Tinto (NYSE: RIO)
- Newmont Corporation (NYSE: NEM)
The materials sector has a market cap of $1.7 trillion in August 2024.
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