The S&P 500 wrapped up the second quarter of 2024 with a gain of 3.9%, setting a new record high in the process. For the half of 2024, the index was up 14.5%.

All three major U.S. indices recorded quarterly advances. This climb was fueled by optimism surrounding artificial intelligence (AI) stocks and speculation about potential interest rate cuts by the U.S. Federal Reserve in the coming months.

During the first half of the year, the Nasdaq, heavily influenced by technology stocks, surged by 18.1%. The Dow Jones Industrial Average, focusing on established blue-chip companies, saw a more modest gain of approximately 3.8%.

The sector picture was more negative, with seven of eleven S&P 500 sectors in negative territory in Q2. However, for the first half, all sectors are in positive territory except for real estate.

Let’s dive into Q2 2024 performance, sector-by-sector. Note that all returns discussed here are total returns, which include the effect of dividends paid during the quarter.

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. Furthermore, the 11 Select Sector SPDRs represent the S&P 500 as a whole.

Overall, four of eleven sectors turned in a positive return in Q2. In addition, three of those sectors beat the S&P 500 return.

Here was the sector breakdown for the quarter.

The Leaders

The top three performers in Q2 were the same as the top three performers in Q3 2023.

Technology, which led all sectors in 2023, gained 8.8% in Q2. 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), NVIDIA (NSDQ: NVDA), and Intel (NSDQ: INTC).

In second place for the second straight quarter was Communication Services. The sector returned 5.2% in Q2 after returning 12.7% in Q2. Year-to-date, it is the top-performing sector. This sector includes diversified telecommunication services, wireless telecommunication services, media, entertainment, and interactive media and services. Components include Facebook (NSDQ: FB), Alphabet (NSDQ: GOOGL), and AT&T (NYSE: T).

The Utilities sector — the worst performer of 2023 — notched another 4.6% gain in Q2 following a strong Q1 performance. Companies that produce, generate, transmit or distribute electricity or natural gas predominantly make up the Utilities sector. Component companies include NextEra Energy (NYSE: NEE), Duke Energy (NYSE: DUK), and Dominion (NYSE: D).

The Laggards

Consumer Staples gained 1.0% in Q2, but nevertheless lagged the S&P 500. 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).

All the other sectors were in negative territory in Q2, although most are still up year-to-date.

Consumer Discretionary was down slightly in Q2 but is still barely in positive territory for the year. 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).

Next up was the Health Care sector, down 1.0% for the quarter following a strong showing in Q1. The sector includes health care equipment and supplies, health care providers and services, biotechnology, and pharmaceuticals industries. Bellwethers in the health care sector include Johnson & Johnson (NYSE: JNJ) and Pfizer (NYSE: PFE).

The Real Estate Index has notched two consecutive quarterly declines and was now the only sector in negative territory for the first half of 2024. This index consists primarily of real estate management and development companies and real estate investment trusts (REITs). Simon Property (NYSE: SPG) and American Tower (NYSE: AMT) are among the largest representatives of this group.

The Financial sector lost 2.0% in Q2 but maintained a double-digit gain for the first half. In addition to banks, this group includes financial services firms, insurance companies, and consumer finance companies. Major companies include Berkshire Hathaway (NYSE: BRK.A, BRK.B), JPMorgan Chase (NYSE: JPM), and Citigroup (NYSE: C).

The Energy sector followed up a 13.5% gain in Q1 with a 2.7% decline in Q2. Chevron (NYSE: CVX), ConocoPhillips (NYSE: COP), EOG Resources (NYSE: EOG), and Schlumberger (NYSE: SLB) are major components of the energy ETF.

The Industrial sector lost 2.9% for the quarter after outperforming the S&P 500 in Q1. Industrial sector component industries include building products, construction and engineering, electrical equipment, conglomerates, machinery, and aerospace/defense. Important constituents of the Industrials sector include Boeing (NYSE: BA), 3M (NYSE: MMM), and Honeywell (NYSE: HON).

In Q2, the Materials sector performed poorly, ending in last place with a loss of 4.5%, effectively surrendering more than half of its gains from Q1. This sector includes companies involved in producing chemicals, construction materials, metals and mining, and paper and forest products. Notably, major players such as DowDuPont (NYSE: DWDP) and Sherwin-Williams (NYSE: SHW) are key components of this sector.

Looking ahead to the second half of the year, the focus will shift to the upcoming elections and anticipated interest rate cuts. These cuts are expected to provide a market boost by year-end, particularly benefiting sectors that are sensitive to changes in interest rates.

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