Takeaways
- Indexes use stock market sectors to group companies based on core businesses.
- The Global Industry Classification Standards lists 11 stock market sectors.
- Investors use stock market sectors to manage their investment portfolios.
- Stock market sector rotation is the flow of funds in and out of favored segments.
- Stock market segments include Information Technology, Health Care, Financials, Consumer Discretionary, and more.
Navigating stock markets like the Nasdaq or NYSE can be overwhelming. There are thousands of companies and stocks to choose from. Beginner investors and seasoned professionals know that choosing the best investment involves research, patience, and a little luck. Splicing the stock market into more manageable categories, like stock market sectors, allows investors to synthesize information faster and make smart money moves.
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What Is a Stock Market Sector?
A stock market sector is a category within a stock market that allows investors to categorize different types of companies. For investors, companies can vary based on various factors, like market capitalization, revenue growth, geography, stage of development, or business activities.
Fund managers use sectors to create sector-based index funds, exchange-traded funds, and mutual funds. Investors can use these passive investments to track the general performance of sectors of the economy, like the massive growth of artificial technology within information technology or scientific advancements within the healthcare space.
Portfolio managers and index creators leverage the Global Industry Classification Standards classifications to determine which stocks are included and excluded from their creation or rebalance.
What Is the GICS?
The Global Industry Classification Standards (GICS) is an analysis framework that helps investors form global and consistent definitions of companies' business activities. The GISC is used by everyone, from the average retail investor to the most sophisticated institutional investors.
Morgan Stanley Capital International and S&P Dow Jones Indices created the classification standard. The GISC is reviewed annually to ensure it fully represents the dynamic global markets. [1]
Here’s how the classification standards work. The GISC has four main tiers:
- Sector
- Industry groups
- Industries
- Sub-industries
Each publicly traded company is assigned one GISC classification within each framework tier based on its “principal” business activity. The GISC considers revenue the main driving factor in determining what constitutes a business’s principal business activity.
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11 Stock Market Sectors
Thinking about the stock market in terms of segments allows investors to compartmentalize and compare trends, investment opportunities, and investment strategies. Here are the 11 stock market sectors to know:
1. Energy
The energy sector comprises companies that work broadly within the oil and glass industry. These companies can focus on drilling wells or exploring and producing oil and gas. Energy is the building block of the worldwide economy and an essential cost to running buildings, factories, and even cars.
Companies within this sector also specialize in refining, marketing, transportation, or chemicals. Other companies include more traditional mining and the production of coal or other fuels.
- Examples: ExxonMobil, Chevron, ConocoPhillips
2. Materials
The materials sector covers companies that provide materials and inputs into manufacturing products. These companies produce chemicals, including agricultural and industrial gases. Major construction materials such as cement, bricks, and lime fall within this sector, too. These are considered essential inputs into the economy. Inflation or added costs on these items, such as tariffs, can cause prices to increase. Mining and paper product companies also fit the materials sector.
- Examples: Sherwin-Williams, Ecolab, Dow Inc.
3. Industrials
The industrial sector includes companies producing building components, home improvement equipment, and products. It also comprises companies that generate revenue and growth from non-residential construction (e.g., commercial real estate buildings), machinery to power this construction, and heavy electrical equipment.
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- Examples: Caterpillar, Honeywell, Deere & Co.
4. Consumer Discretionary
You don’t have to be a high earner to be quite familiar with companies within the consumer discretionary stock market segment. These companies support most of how households spend their discretionary income, which consists of major expenses within your monthly budget.
Companies in this segment concentrate on making everything from the car you drive to clothes you wear or supporting your next family vacation.
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- Examples: Amazon, Tesla, Royal Caribbean
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5. Consumer Staples
Consumer staples differ from consumer discretionary based on the kinds of products companies within this segment produce. Consumer staple companies focus on the essential elements in your pantry or refrigerator. These items include beverages, food products (think packaged food like coffee, tea, meat, and fish), and pharmacies.
These household or personal products cover most items you purchase at the grocery store. Learn more about how to curb your spending.
- Examples: Walmart, Procter & Gamble, Costco
6. Heathcare
The healthcare sector has become extremely popular over the past decade. Companies within this sector specialize in creating medical equipment, devices, and supplies. This segment is also expansive enough to include healthcare technology companies and wholesalers of healthcare equipment.
Large pharmaceutical companies that provide approved therapeutics and biotechnology companies that drive scientific advancement and research and development also fall under the healthcare segment umbrella.
- Examples: Pfizer, Eli Lilly, Johnson & Johnson
7. Financials
The financial sector consists of all things finance. The financial industry has permeated every aspect of our lives, and for younger generations, quick access to our bank accounts lives on our mobile home screens. According to a survey from Consumer Reports, over 77% of mobile banking app users check their accounts at least once a week.[2]
The financial sector includes businesses such as banks, capital markets, and other financial institutions. Companies that issue credit cards, personal loans, or mortgages also belong to this sector.
- Examples: Visa, JP Morgan Chase, Mastercard
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8. Information Technology
The information technology sector is one of the most closely watched stock market sectors. This sector consists of companies that build and deliver software services, IT platforms, database management systems, and firewalls. It also houses companies that create technology hardware—like laptops, desktops, and printers—that we use daily to support our personal and office lives.
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- Examples: Apple, Nvidia, Microsoft
9. Communication Services
Communication is part of everyday life, and some companies have cornered the market on modern communication. Whether you are talking, texting, surfing the internet, or consuming media, there is a communication business as part of that ecosystem.
The communications services sector consists of traditional media, advertising firms, public relations companies, and radio broadcasting. It also encompasses the supporting infrastructure for these outward-facing communication businesses, like behind-the-scenes cable networks and wireless or in-line telecommunication services.
These companies also provide all your entertainment, whether you are a huge gamer, TV watcher, or movie lover. If you are a beginner investor, these can be great stocks for you to purchase to build your portfolio and purchase something you are familiar with.
- Examples: Verizon, Fox Corporation, Paramount Global
10. Utilities
The utilities stock market sector encompasses companies that distribute electricity, natural gas, water, and renewable energy. This basket of companies includes nuclear facilities and propane distributors.
A sub-sector also concentrates on manufacturing the equipment necessary to support alternative energy sources, like solar power. Companies in the utilities sector are the backbone of how most technology companies and households survive.
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- Examples: Duke Energy, Constellation Energy, NextEra Energy
11. Real Estate
The main industry category within the real estate stock market sector is Real Estate Investment Trusts (REITS). These companies manage, buy, lease, and collect rents from residential or commercial buildings. Investors nearing retirement or who want a passive income can earn dividends as part of their fixed-income investing strategy.
- Examples: Public Storage, CBRE Group, Iron Mountain Incorporated
Smart Summary
Stock market sectors are groups of companies within a stock market based on the company’s primary revenue stream and business activities. Anyone trying to build a diversified portfolio should know how stock market segments work and allocate money to each segment. You should also consider what portion of your investment portfolio is invested in the stock market and how fixed-income strategies and alternative investments can improve your portfolio composition.
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Frequently Asked Questions
Sector rotation is the ebb and flow of funds in and out of favored sectors of the economy. These funds flow based on the overall economy’s performance (whether in a bull market or bear market) and general investor sentiment.
Index investing can be an excellent place to start investing in the stock market. You aren’t burdened with single stock risk because you are investing in a basket of stocks, which decreases risk. (Read more about the differences between common stock and preferred stock).
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(1) Morgan Stanley Capital International. The Global Industry Classification Standard (GICS®). Last Accessed March 15, 2025.
(2) Consumer Reports. Banking Apps – 2023 Nationally Representative Phone and Internet Survey. Last Accessed March 15, 2025.
