The Tumble Of Two Sectors

The S&P 500 fell 1.21% yesterday. While that’s not an ideal day for investors, there have been 15 days this year that were worse. More unusual than the decline at the index level were the 5%+ declines in Communication Services and Consumer Discretionary following negative earnings reactions from Alphabet (GOOGL) and Tesla (TSLA), respectively. The two stocks were the largest drags on the index for the day.

This was the first time this year that multiple sectors fell at least 5% in a single session. It happened twice during last year’s Tariff Tantrum on April 3 and April 4, twice during the 2022 bear market, and ten times around the COVID Crash in 2020. Before that, there were four such days during the 2011 sovereign debt scare, 43 during the Financial Crisis in 2008 and 2009, and nine following the bursting of the Dot-Com Bubble from 2000 through 2002. Outside of those major market downturns and yesterday, it hasn’t happened at all since the turn of the century.

On the bright side, assuming no further deterioration in the current market, only two sectors fell more than 5% yesterday, which pales in comparison to past market downturns. As the chart below shows, there were days when all eleven S&P 500 sectors shed at least 5% on the worst days of the Financial Crisis and Covid Crash, and ten during the sovereign debt scare in 2011.

Below are one-year charts of Communication Services and Consumer Discretionary. Yesterday’s declines pushed both sectors well into extremely oversold territory. Communication Services finished 2.27 standard deviations below its 50-DMA, while Consumer Discretionary fell to 2.95 standard deviations below its 50-DMA, knocking on the door of three full standard deviations.