The Bullish Bears break down a list of the 11 stock market sectors. Sectors are the umbrella of industries and sub-industries containing the stock symbols and companies that traders and investors buy and sell.
Sectors are comprised of stocks listed on exchanges. Investors or traders cannot buy the major exchanges but can get exposure via ETFs and futures.
List of Stock Market Sectors
The U.S. stock market is divided into 11 sectors that represent different areas of the economy.
| Sector | Symbol | Information Technology | XLK |
|---|---|
| Healthcare | XLV |
| Energy | XLE |
| Real Estate | XLRE |
| Financial | XLF |
| Basic Materials | XLB |
| Utilities | XLU |
| Industrials | XLI |
| Consumer Staples | XLP |
| Consumer Discretionary | XLY |
| Communications | XLC |
Stock Market Sector Basics
When the market is booming, sectors can be overlooked. However, knowing which sectors are strong or weak is important when corrections come. There are 11 different sectors in the stock market, and within each of those are industries and sub-industries.
Sectors allow stocks that have a lot in common to be grouped together. As a result, you can compare them and see which stocks outperform others. How are the different stock sectors doing? How are the stocks in that sector faring against each other? This information can be helpful to traders and investors looking to find opportunities in the market.
In 1999, the Global Industry Classification Standard (GICS) was created to help organize the stock market. This allows traders and investors to classify stocks using standardized sector and industry definitions.
Each of these sectors plays an important role in trading and investing.
Defensive and Cyclical Stock Market Sectors
There are 11 sectors in the stock market. However, you can break those 11 sectors into cyclical and defensive categories.
Knowing what each category means can come in handy when the market is taking a downturn or an upturn. All sectors don’t run together. The market tug-of-war will influence each category and the different stock sectors.
The cyclical category is reactionary. In other words, these sectors react to market and economic conditions. The defensive category tends to fall less and hold up better during an economic downturn.
Defensive Stock Market Sectors
- Utilities
- Consumer Staples
- Healthcare
These sectors tend to generate consistent demand no matter the economic climate. We all need water, gas, and electricity. You have to pay your utility bill regardless of what the stock market is doing.
Consumer staples include food, beverages, and other everyday products. Even if the economy weakens, people still need these products.
Unfortunately, we also still get sick regardless of what the economy is doing, which is why healthcare is considered a defensive sector.
Utilities Sector
Utilities are in the defensive sector, characterized by low beta, volatility, and higher dividend yields. Because of this, they can be a diversifier for other sectors in your portfolio.
The utility sector is one of the most stable in terms of revenue, earnings, and dividends. Utilities generate revenue by selling electricity or water and tend to have less exposure to price fluctuations than companies that produce goods like food or clothing.
Consumer Staples Sector
Consumer staples are a group of stocks that includes companies that produce and sell items consumers use every day, such as food and beverages, housewares, drugs, and tobacco. These stocks tend to have lower volatility than many other areas of the market and can also offer consistent dividend yields.
Consumer staples companies can include:
- Food companies like Kraft Heinz (KHC), which makes packaged foods.
- Beverage makers such as Coca-Cola (KO) and PepsiCo (PEP).
- Household goods manufacturers such as Procter & Gamble (PG), which produces products such as Tide detergent and Gillette razors.
- Tobacco companies such as Altria Group (MO).
Healthcare Sector
The healthcare sector is a wide-ranging category that includes companies focusing on research and development, manufacturing, and sales of pharmaceuticals and medical equipment.
The sector includes firms involved in drug discovery, testing, and production; laboratory instruments; hospital equipment; diagnostic imaging systems; surgical instruments; and dental implants. It also includes companies focused on developing new products or processes for the pharmaceutical industry, such as biotech.
We consider healthcare stocks defensive investments because they tend to perform better during periods of market volatility.
Cyclical Stock Market Sectors
- Energy
- Financial
- Information Technology
- Basic Materials
- Industrials
- Consumer Discretionary
- Communications
- Real Estate
The cyclical category makes up the other sectors. These sectors react more to what the market and economy are doing, which means they can become more volatile.
For example, banks, investment funds, and insurance companies make up much of the financial sector. These companies react to their economic environment, including changes in interest rates.
The consumer discretionary and real estate sectors also tend to benefit from a strong economy because they make money when people spend money. Clothing companies, media companies, retailers, and other discretionary businesses can be affected when consumers have to tighten their belts.
The same can be said for information technology and communications. When consumers and businesses cut spending, purchases of electronics, software, media, and other services can be affected.
Energy Sector
Financial Sector
Financial sector stocks are shares in companies involved in the financial industry, such as banks and insurance companies. The financial sector is a major part of our economy and includes businesses like:
- Banks, which lend money
- Insurance companies, which protect against loss
- Real estate investment trusts (REITs)
Some of the best-known stocks in the financial sector include Berkshire Hathaway (BRK.A and BRK.B) and JPMorgan Chase (JPM).
Information Technology Sector
Basic Materials Sector
The basic materials sector is a broad category that includes mining, steel, and coal. The sector is cyclical; when the economy is doing well, people tend to buy more cars, houses, and other items that require raw materials like steel or copper. This can increase demand for these goods.
This sector can also be volatile and swing depending on commodity prices, or the prices at which raw goods trade.
Well-known materials stocks include paint maker Sherwin-Williams (SHW) and chemicals manufacturer DuPont (DD).
Industrials Sector
Examples of industrial stocks include Caterpillar Inc. (CAT), General Electric Co. (GE), and Boeing Co. (BA). Industrial sector performance is closely tied to the overall health of the economy.
Investors who buy industrials are investing in companies that can experience growth in earnings or sales due to various economic factors.
Consumer Discretionary Sector
Consumer discretionary stocks are companies that sell goods and services considered non-essential to consumers’ daily lives. Consumer-oriented stocks typically sell luxury goods, leisure activities, and travel experiences.
Types of consumer discretionary stocks include restaurants like McDonald’s, casinos like Las Vegas Sands Corp., hotels like Marriott International, and cruise lines such as Carnival Cruise Line.
Communications Sector
Communication stocks have a long growth history. In addition, communication companies can pay dividends regularly, making them attractive to investors who want income from their investments as well as capital gains.
Social media giant Meta (META) and search engine company Alphabet (GOOG) are among the biggest stocks in communication services.
Real Estate Sector
The real estate sector includes stocks involved in commercial and residential properties, as well as companies that provide construction services to build new homes, stores, and malls. You can invest in many real estate companies, from luxury hotels to office buildings. Each one has its niche market and specific focus.
Real Estate Investment Trusts (REITs) are a way for investors to get exposure to real estate without having to deal with leasing tenants themselves. REITs trade on exchanges like stocks, so they’re easy to buy and sell through a brokerage account.
Popular Stock Lists
Frequently Asked Questions
Amazon is in the Consumer Discretionary sector. The industry is Catalog/Specialty Distribution.
