Editor’s Note: As we wrap up the third quarter of 2024, the market has surprised us yet again. With all major U.S. indices posting gains, investors are seeing some unexpected shifts in sector performance. In a year dominated by uncertainty, it’s refreshing to see every S&P 500 sector in positive territory, with some standout performers rising sharply.

The S&P 500 finished the third quarter of 2024 with a 5.5% gain. All three major U.S. indices posted quarterly gains, though the Nasdaq underperformed compared to the Dow and S&P 500. For the first time in a long while, the utility sector took the lead, gaining 19.4% in Q3. Real estate, another key income sector, followed closely with a 17.1% gain for the quarter.

Let’s dive into Q3 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.

Usually, the S&P 500 falls somewhere in the middle of sector performance rankings, but this quarter was different. The index’s heavy weighting in technology companies, combined with a flat tech sector performance in Q3, led to nine of the eleven S&P 500 sectors outperforming the overall index. Overall, ten of eleven sectors turned in a positive return in Q3.

Here was the sector breakdown for the quarter.

Utilities Lead The Pack

The Utilities sector was the worst performer of 2023, but it has been strong every quarter this year. Not only was it the top-performing sector in Q3, but it is also the top-performing sector year-to-date. 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 Real Estate Index was the only sector in negative territory for the first half of 2024, but it turned in a strong Q3 performance. That put the sector into positive territory for 2024 with a year-to-date return of 14.2%. 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 Industrial sector bounced back from a loss in Q2 to return 11.5% in Q3. 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).

The Financial sector also bounced back from a decline in Q2 and is now up 21.9% for the year. 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).

Consumer Discretionary was the final sector to turn in a double-digit return in Q3. 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 was the worst performer in Q2 but bounced back with a return of 9.6% in Q3. Year-to-date this sector is now up 14.1%. Component companies include those 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.

Consumer Staples gained 9.0% in Q3 and is now up 17.6% on the year. 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).

The Health Care sector gained 6.1% for the quarter and is now up 14.2% on the year. 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).

Communication Services gained 5.9% in Q3 and is in second place among sectors for the year with a 25.5% gain. 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).

Tech: Flat in Q3 But Strong YTD

Technology, which led all sectors in 2023, was flat in Q3, but is still up 17.9% year-to-date. 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).

The Energy sector was the only sector to decline in Q3, and it is the only sector to have only a single digit gain for the year. However, this follows several years of outstanding performance. From the end of the COVID-19 market crash in 2020, the energy sector has returned 346%. That is far ahead of the second-leading performer over that time, technology with a 230% return. Chevron (NYSE: CVX), ConocoPhillips (NYSE: COP), EOG Resources (NYSE: EOG), and Schlumberger (NYSE: SLB) are major components of the energy ETF.

Looking ahead to the end of the year, the focus will be on the elections and the prospect of further interest rate cuts. These cuts are expected to especially benefit income sectors like utilities and real estate, the top two performers in Q3.

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