Market Sectors
The S&P 500 is split into eleven sectors under the Global Industry Classification Standard. Each one has its own sensitivity to interest rates, commodity prices, and the business cycle, so a single market trigger rarely affects them all the same way.
A useful first split is cyclical versus defensive. Cyclical sectors such as consumer discretionary, industrials, materials, financials, and energy tend to do better when the economy is expanding. Defensive sectors such as consumer staples, health care, and utilities sell things people keep buying in a downturn, so they often hold up better when growth worries rise.
Watching which sectors lead and lag tells you a lot about what investors are thinking, often before the overall index moves much. A shift toward defensives can be an early sign of growing concern about the economy.
Key topics in market sectors
Cyclical vs. defensive sectors
Which sectors lead in expansions, which hold up in slowdowns, and what rotations signal.
Sector reactions at a glance
A table of commonly observed tendencies for all major sectors.
Rate-sensitive sectors
Why utilities, REITs, homebuilders, and banks respond to yields in different ways.
Commodity-sensitive sectors
Oil, natural gas, metals, and how energy prices spill into airlines and retailers.
Growth vs. value
Why long-duration growth stocks are more sensitive to long-term interest rates.
Large caps vs. small caps
What the Russell 2000 says about domestic growth and borrowing costs.
What to watch
- Relative performance of defensive sectors versus cyclical sectors
- Moves in the 10-year Treasury yield, which weigh on rate-sensitive groups
- Weekly U.S. crude inventory data from the Energy Information Administration
- Small-cap performance relative to large caps as a read on domestic growth
Frequently asked questions
How many sectors are in the S&P 500?
Eleven, under the Global Industry Classification Standard: Information Technology, Health Care, Financials, Consumer Discretionary, Communication Services, Industrials, Consumer Staples, Energy, Utilities, Real Estate, and Materials.
Which sectors do best when interest rates fall?
Rate-sensitive groups such as real estate, utilities, and long-duration growth stocks have often benefited from falling yields, though the reason rates are falling matters. Cuts made because of a weakening economy can coincide with weaker stocks overall.
What is sector rotation?
Sector rotation is the movement of investor money from one part of the market to another as expectations for growth, inflation, and interest rates change.
Official sources
For the full picture, read our complete guide to what moves the stock market.