The stock market is divided into sectors, which are groups of companies operating in a similar business area. For example, Chevron, an oil company, operates in the energy sector.
Investors use sectors to monitor the performance of certain areas of the stock market along with comparing them to their investment returns.
There are currently eleven market sectors: Information Technology, Healthcare, Energy, Utilities, Real Estate, Industrials, Consumer Discretionary, Consumer Staples, Communication Services, Materials, and Financials.
In parentheses next to the sector name, you will find the ticker symbol for reference.
Information Technology (XLK)
The information technology sector consists of companies centered around data and the internet. Adobe, PayPal, and Salesforce are popular companies in this sector. The IT sector has been an area of high growth over the past few years as technology becomes more widespread. Companies in this sector generally experience high growth and high profit margins.
Healthcare (XLV)
The healthcare sector consists of companies centered around the delivery and management of healthcare, along with the development of pharmaceuticals. United Healthcare, Johnson and Johnson, and Pfizer are popular companies in this sector. The healthcare sector has benefitted from an increasingly older population and demand for chronic medical care.
Energy (XLE)
The energy sector consists of companies centered around the sourcing, production, and distribution of energy resources. Chevron, Exxon Mobil, and Royal Dutch Shell are popular companies in this sector. The energy sector is heavily tied to economic conditions such as demand for oil and other resources.
Utilities (XLU)
The utilities sector consists of companies centered around essential services for public use. Southern Company, Waste Management, and NextEra Energy are popular companies in this sector. The utilities sector is highly recession-proof, meaning they are generally unaffected by economic downturns.
Real Estate (XLRE)
The real estate sector consists of companies centered around the construction, buying/selling, and management of housing units. Simon Property Group operates popular shopping malls across the United States and Camden Property Trust manages over 56,000 apartment units. Real estate stocks, referred to as REITs (Real Estate Investment Trusts), are required by law to distribute 90% of earnings to investors.
Industrials (XLI)
The industrial sector consists of companies centered around the manufacturing of finished goods. Boeing, 3M, and Lockheed Martin are popular companies in this sector. Like the energy sector, the industrial sector is sensitive to economic conditions.
Consumer Discretionary (XLY)
The consumer discretionary sector consists of companies centered around the production and distribution of non-essential items. Tesla, Amazon, and Activision Blizzard are popular companies in this sector. Strength in the consumer discretionary sector helps give investors a sense of the overall economy and consumer spending habits.
Consumer Staples (XLP)
The consumer staples sector consists of companies centered around the production and distribution of essential items. Procter and Gamble, Coca-Cola, and Kraft Heinz are popular companies in this sector. Like the utilities sector, the consumer staples sector is generally unaffected by economic downturns.
Communication Services (XLC)
The communication services sector consists of companies centered around the transmission of information through a physical network. AT&T, Verizon, and T-Mobile are popular companies in this sector. Companies operating in this sector typically own many assets to support their infrastructure.
Materials (XLB)
The materials sector consists of companies centered around the discovery and production of raw materials. Sherwin Williams, Vulcan Materials, and Martin Marietta are popular companies in this sector. The materials sector is sensitive to economic conditions due to its connection with economic expansion.
Financials (XLF)
The financial sector consists of companies centered around the management of money. Bank of America, Goldman Sachs, and Wells Fargo are popular companies in this sector. The financial sector is one of the largest sectors in the world due to wide range of influence.
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