Stock Market’s Spectacular Q3: Highest Sector Performer is Utilities

September, typically considered to be the weakest month for stocks, didn't turn out that way in 2024. We had a winning month—the S&P 500 eked out a higher close, and the S&P 500 ($SPX), Dow Jones Industrial Average ($INDU), and Nasdaq Composite ($COMPQ) had a positive quarter. Out of the three, the Nasdaq had the smallest gain, mainly due to investors rotating out of Big Tech stocks and moving into other sectors.

This rotation can be seen in the StockCharts MarketCarpet (see below).

FIGURE 1. UTILITIES LEAD IN Q3. The StockCharts MarketCarpet shows that Utilities was the best performer in Q3. On the opposite end of the spectrum, we have Energy.Image source: StockCharts.com. For educational purposes.

Utilities was the leading sector for Q3, followed by Real Estate and Industrials.

The Utilities Select Sector SPDR ETF (XLU) chart (see below) shows that the sector has been trending higher since XLU crossed above its 21-day exponential moving average (EMA) at the end of July. It closed at a record high on September 30. The relative strength index (RSI) is just above 70, so there is potential for XLU to rise higher.

FIGURE 2. DAILY CHART OF XLU. Since July, XLU has been on an upward trend closing at an all-time high in September.Chart source: StockCharts.com. For educational purposes.

Utility stocks are gaining investor attention because they can provide energy to Artificial Intelligence companies. Although utility stocks may not be growth-oriented, most provide dividends, which can generate extra cash in your portfolio.

On the Other End of the Spectrum...

The worst-performing sectors for Q3 were Communication Services, Technology, and Energy. The mega-cap stocks with the biggest losses are Microsoft (MSFT), Alphabet, Inc. (GOOGL), and Amazon.com (AMZN). However, there were still some winners, as Apple, Inc. (AAPL) and Meta Platforms (META) had impressive gains in Q3.

What To Expect in Q4

Given that it is an election year, volatility will likely rise in the last quarter of the year. But that could settle down after the elections, since a big uncertainty factor will be eliminated. Thus, we could see more of the bullish sentiment extend into Q4. Unless enthusiasm for Tech stocks picks up, the sector may not move much in performance in the next quarter. Add the Sector Summary panel on your dashboard and closely monitor sector performance during the final quarter of the year.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.