The economy remains mired in a COVID-19 recession, but the market recovery that started in the second quarter continued through the third. One exception was the energy sector, which gave up a large chunk of its huge second quarter gains. The S&P 500 followed the 20% rise in Q2 with a gain of 8.5% in Q3. Every sector turned in a gain during the quarter, with the notable exception of the energy sector. Let's dissect this quarter, sector-by-sector. 11 Sector Review Select Sector SPDRs are targeted exchange-traded funds (ETFs) that divide the S&P 500 into 11 sector index funds. These sectors are Communication Services, Consumer Discretionary, Consumer Staples, Energy, Financials, Health Care, Industrials, Materials, Real Estate, Technology, and Utilities. The 11 Select Sector SPDRs represent the S&P 500 as a whole. The Consumer Discretionary sector was the best performer in Q3 with a return of 15.3%. It is also the second-best performer of the year with a return of 18.3% year-to-date (YTD). This sector includes industries such as automobiles and components, consumer durables, apparel, hotels, restaurants, leisure, media, and retailing. It is comprised of companies such as Amazon (NSDQ: AMZN), Home Depot (NYSE: HD), and Walt Disney (NYSE: DIS). The Materials sector rose 13.5% in the second quarter, which was enough to finally put this sector in positive territory for the year. This sector is up 5.4% YTD. The sector includes companies that produce chemicals, construction materials, metals and mining, and paper and forest products. Among its largest components are DowDuPont (NYSE: DWDP) and Sherwin-Williams (NYSE: SHW). The Industrial sector returned 12.5% for the quarter, but remains down 4.0% YTD. Component industries include aerospace and defense, building products, construction and engineering, electrical equipment, conglomerates, and machinery. Important constituents of this sector include Boeing (NYSE: BA), 3M (NYSE: MMM), and Honeywell (NYSE: HON). Technology has been the biggest winner of the year, with a YTD return of 28.6%. The sector was the fourth best performer of the quarter with an 11.9% return. This sector includes technology hardware, storage, and peripherals; software; communications equipment; semiconductors and semiconductor equipment; IT services; and electronic equipment. Components of this ETF include Apple (NSDQ: AAPL), Microsoft (NSDQ: MSFT), and Intel (NSDQ: INTC). Communication Services turned in a quarterly return of 10.2%. The sector is also the third-best YTD performer with a return of 11.5%. This sector includes diversified telecommunication services, wireless telecommunication services, media, entertainment, and interactive media & services. Components include Facebook (NSDQ: FB), Alphabet (NSDQ: GOOGL), and AT&T (NYSE: T). The Consumer Staples was the final member to outperform the S&P 500 with a return of 10.0%. This sector continues to be the least volatile of all sectors since the pandemic started. Making up this sector are companies involved in the development and production of consumer products that cover food and drug retailing, beverages, food products, tobacco, household products, and personal products. Component stocks include Procter & Gamble (NYSE: PG), Philip Morris International (NYSE: PM), and Coca-Cola (NYSE: KO). |
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