The S&P 500 is divided into 11 market sectors based on the Global Industry Classification Standard (GICS). The GICS sorts companies into particular sectors based on their primary business activities. Investors can then use the sector classifications to ensure that their portfolios are fully diversified and not overly exposed to one particular area of the economy.
[Sign up for stock news with our Invested newsletter.]
Investors can also use sector classifications to increase their exposure to particular themes, such as technology or energy. To understand how best to balance your sector exposure in your portfolio, you must first understand what types of stocks are in each sector.
Here’s a look at each of the 11 stock market sectors, and some of the most notable companies within each one:
— Information technology.
— Financials.
— Consumer discretionary.
— Communication services.
— Health care.
— Industrials.
— Consumer staples.
— Energy.
— Utilities.
— Real estate.
— Materials.
Information Technology
As of July 31, the largest sector in the S&P 500 by weighting is the information technology sector. The technology sector makes up roughly a third (34%) of the S&P 500 by market capitalization. While many modern companies develop and use technology as a key part of their businesses, information technology (IT) companies’ primary business is selling technology products and services. In the past 10 years, the Technology Select Sector SPDR Fund (ticker: XLK) has more than doubled the return of the S&P 500. However, technology stocks can be volatile and many trade at high valuations.
Major examples: Apple Inc. (AAPL), Microsoft Corp. (MSFT), Nvidia Corp. (NVDA) Five-year annualized performance: +19.5% Largest information technology sector ETF: Vanguard Information Technology ETF (VGT)
Financials
The financial sector makes up about 13.8% of the S&P 500. The financial sector includes companies involved in investing, finance and the movement and storage of money. Financial sector industries include insurance, credit services, asset management and banks. Financial sector stocks are generally considered stable, but the financial sector plummeted during the 2008 financial crisis thanks to fears over bank contagion. The financial sector typically benefits from a strong U.S. economy because it relies heavily on lending, including mortgages. Many financial sector stocks benefit from high interest rates, but high rates can also hurt loan growth.
Major examples: Berkshire Hathaway Inc. (BRK.A, BRK.B), JPMorgan Chase & Co. (JPM), Visa Inc. (V) Five-year annualized performance: +19.1% Largest financial sector ETF: Financial Select Sector SPDR ETF (XLF)
Consumer Discretionary
The consumer discretionary sector accounts for about 10.4% of the S&P 500’s weighting. Discretionary products are things that people buy that are luxury items or services and are not necessary for survival or day-to-day life. Jewelry, cars, sporting goods and electronic devices are examples of discretionary products. If it’s something you want but can live without, it’s probably a discretionary product. Discretionary spending relies heavily on disposable income, meaning the sector depends on a healthy U.S. economy. Consumer discretionary industries include restaurants, gambling and apparel retail. Growth in global e-commerce sales and corporate travel could be tailwinds for the sector.
Major examples: Amazon.com Inc. (AMZN), Tesla Inc. (TSLA) and Home Depot Inc. (HD) Five-year annualized performance: +11.1% Largest consumer discretionary sector ETF: Consumer Discretionary Select Sector SPDR ETF (XLY)
Communication Services
The communication services sector has a 9.9% weighting in the S&P 500. Communication services companies offer products and services that help people stay connected via the internet or phone. In addition, entertainment and media companies are also included in the sector, along with industries such as advertising agencies, electronic gaming and internet content and information. The communication services sector was historically known as the telecommunications sector, but it was reconstructed in 2018 to include a wider variety of companies. Some popular Silicon Valley internet companies that investors may think of as technology companies are now technically classified as communication services stocks.
Major examples: Alphabet Inc. (GOOG, GOOGL), Meta Platforms Inc. (META), Netflix Inc. (NFLX) Five-year annualized performance: +14.2% Largest communication services sector ETF: Communication Services Select Sector SPDR ETF (XLC)
Health Care
The health care sector makes up about 8.8% of the S&P 500 market cap. Health care companies include medical supply companies, scientific research companies, pharmaceutical companies and other companies focused on products and services to improve wellness of the human body or mind. The health care sector even includes recreational and medicinal cannabis companies, while also including industries such as biotechnology, drug manufacturing and health care plans. An aging U.S. population may produce significant investing opportunities in health care in coming decades as the Baby Boomer generation creates tremendous demand for health care services.
Major examples: Eli Lilly & Co. (LLY), UnitedHealth Group Inc. (UNH), Johnson & Johnson (JNJ) Five-year annualized performance: +6.1% Largest health care sector ETF: Health Care Select Sector SPDR ETF (XLV)
[READ: 5 Best Nuclear Energy Stocks and ETFs to Buy Now]
Industrials
The industrial sector makes up 8.6% of the S&P 500 by market cap. The industrial sector includes companies that manufacture and distribute capital goods, but it also includes companies in the transportation business and companies that provide commercial services and supplies. Many of the blue-chip manufacturing and military companies that have played a critical role in shaping American history are classified as industrials. Because a range of different businesses are included in the sector, it has 14 unique industries. Aerospace and defense, airlines and railroads are three examples of industrial sector industries. The industrial sector tends to perform well during the early stages of the business cycle.
Major examples: Caterpillar Inc. (CAT), GE Aerospace (GE), Union Pacific Corp. (UNP) Five-year annualized performance: +18.1% Largest industrial sector ETF: Industrial Select Sector SPDR ETF (XLI)
Consumer Staples
The consumer staples sector makes up about 5.2% of the S&P 500. The consumer staples sector includes companies that provide products that are necessary for day-to-day life. Examples of consumer staples companies include food and beverage makers, personal product providers and household product manufacturers. Unlike consumer discretionary companies, consumer staples companies are generally very stable even during economic downturns because of the critical nature of their businesses. Grocery stores, tobacco companies and education and training service providers are also examples of consumer staples industries. These industries remain relatively steady even during recessions, making the sector an excellent defensive investment.
Major examples: Walmart Inc. (WMT), Procter & Gamble Co. (PG), Costco Wholesale Corp. (COST) Five-year annualized performance: +7.8% Largest consumer staples ETF: Consumer Staples Select Sector SPDR ETF (XLP)
Energy
The energy sector makes up about 3% of the S&P 500’s market cap. Energy companies include all companies that operate in the oil, gas and consumable fuels businesses. These companies range from oil and gas drillers to companies that transport and refine fuel to companies that sell and distribute fuel to consumers. The energy sector consists of industries such as oil and gas exploration and production, oil and gas equipment and services and integrated oil and gas majors. The performance of many energy sector stocks is highly correlated to crude oil and natural gas spot prices.
Major examples: Exxon Mobil Corp. (XOM), Chevron Corp. (CVX) and Conoco Phillips (COP) Five-year annualized performance: +24.4% Largest energy sector ETF: Energy Select Sector SPDR ETF (XLE)
Utilities
The utilities sector accounts for about 2.5% of the S&P 500’s weighting. Utility services are services that are required in a comfortable, modern home or business, such as electricity, water and gas. In addition, many utility companies are developing and integrating renewable energy sources. Utility industries include regulated electric companies, renewable utilities and independent power producers. The utilities sector is extremely defensive, meaning it typically holds up well during economic downturns but may underperform during periods of economic expansion. The sector is also known for its high dividend yields, making it an attractive option for retirees and income investors.
Major examples: NextEra Energy Inc. (NEE), Southern Co. (SO), Duke Energy Corp. (DUK) Five-year annualized performance: +10.5% Largest utilities sector ETF: Utilities Select Sector SPDR ETF (XLU)
Real Estate
Although a major part of the larger economy, the real estate sector makes up just 2% of the S&P 500 by market cap. The real estate sector includes companies that own and manage real estate assets; many companies in this sector are structured as real estate investment trusts, or REITs. REITs are companies that own, operate or finance real estate properties by pooling capital investors and distributing income generated from their investments. Many REITs have high dividend yields as well. Real estate sector industries include industrial REITs, specialty REITs and health care facilities REITs. In addition to REITs, the sector also includes real estate development and management companies.
Major examples: Prologis Inc. (PLD), American Tower Corp. (AMT), Equinix Inc. (EQIX) Five-year annualized performance: +5.9% Largest real estate sector ETF: Vanguard Real Estate ETF (VNQ)
Materials
The materials sector has a 1.8% weighting in the S&P 500, making it the sector with the least amount of influence over the daily ups and downs of the broader index. As the name implies, materials companies provide the raw materials that companies in other sectors use to produce goods. Materials companies might mine and distribute commodities such as gold, copper and zinc or harvest and process wood used in construction. Specialty chemical companies that produce plastics, polymers and other synthetic materials are included in the materials sector, along with industries such as steel production, agricultural inputs and building materials. The sector also includes companies that specialize in packaging materials. Materials sector stocks tend to perform well during the early stages of the business cycle.
Major examples: Linde PLC (LIN), Sherwin-Williams Co. (SHW), Freeport-McMoRan Inc. (FCX) Five-year annualized performance: +10% Largest materials sector ETF: Materials Select Sector SPDR Fund (XLB)
More from U.S. News
6 of the Best AI ETFs to Buy for 2025
10 Best Growth Stocks to Buy for 2025
Artificial Intelligence Stocks: The 10 Best AI Companies
Stock Market Sectors 101: A Guide to All 11 Sectors originally appeared on usnews.com
Update 08/25/25: This story was previously published at an earlier date and has been updated with new information.