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The Top 3 Sectors Poised For Growth This Summer

Background of Stock heatmap on the monitor in predominantly red

Key Points

  • The communications sector will lead Q2 earnings growth, but these companies will do most of the heavy lifting. 
  • Technology is another hot-ticket growth item this year, but the gains won't be evenly distributed. 
  • Healthcare is another sector poised for sustained, index-leading growth for S&P 500 investors. 
  • 5 stocks we like better than Communication Services Select Sector SPDR Fund

The 2nd quarter and first half of 2024 are rapidly coming to a close, setting the market up for its summer adventure. The latest read on earnings expectations is positive and suggests the market will continue to rise. Not only are S&P 500 NYSEARCA: SPY earnings expected to accelerate from the prior quarter, but the consensus estimate for Q2 reported by Factset is holding up under revisions, and the forecasts for the year and next year are rising. 

In this scenario, the S&P 500 could continue to rise through the end of next year, assuming no change in the trend. This is a look at the three sectors with the hottest growth outlook going into the Q2 earnings reporting season and the stocks set up to drive them higher by year-end.

Communications Services is the Hot-Ticket Item This Quarter

Communication Services Select Sector SPDR Fund Today

Communication Services Select Sector SPDR Fund stock logo
XLCXLC 90-day performance
Communication Services Select Sector SPDR Fund
$83.57
-1.78 (-2.09%)
(As of 01:16 PM ET)
52-Week Range
$62.82
$87.93
Dividend Yield
0.63%
Assets Under Management
$19.14 billion

Communications Services NYSEARCA: XLC will be the hot-ticket item this quarter and the remainder of the year. The sector is expected to grow by 18.25% in Q2 and 21% for the year, with both estimates rising. Because the bar is set low for many companies within the index, estimates may continue rising this year. However, the bulk of the gains will be posted by only two companies, so targeting them may be better than an index-tracking ETF. Those two companies are Meta Platforms NASDAQ: META and Google parent Alphabet NASDAQ: GOOGL, which account for nearly 50% of the portfolio and are forecast to grow their earnings by 60% and 27%. 

Among the differences in their outlooks is that Meta Platforms will see more significant top-line growth and substantially wider margins. Another difference is that Meta Platform’s analysts have been lowering the bar while Alphabet’s has raised its. Both could produce outperformance in this scenario, but it would be more significant for Google. Analysts rate both stocks at Moderate Buy, and price target revisions have led them higher this year. However, Meta Platform's price targets were trimmed over the last quarter and may not rise again without a solid report. Meanwhile, legacy communications companies like Verizon NYSE: VZ are expected to post a small single-digit top-line advance and margin contraction. 

Communications Services XLC stock chart

Technology Sector: AI Is Driving Big Gains for Some Companies

Technology Select Sector SPDR Fund Today

Technology Select Sector SPDR Fund stock logo
XLKXLK 90-day performance
Technology Select Sector SPDR Fund
$217.53
-7.67 (-3.41%)
(As of 01:16 PM ET)
52-Week Range
$159.50
$238.14
Dividend Yield
0.59%
Assets Under Management
$69.94 billion

The Technology Sector NYSEARCA: XLK is expected to post the 3rd largest earnings gain for the quarter, about 17%, and the 2nd largest for the year, 18.8%, suggesting steady high-teens growth for the remainder of the year. This estimate is rising on revisions for most top-ten holdings, a who’s-who list of today’s leading AI players. The sector is heavily concentrated in Microsoft NASDAQ: MSFT and Apple NASDAQ: AAPL, which account for nearly 45% of the index, but all of the top 10 contribute to the outlook. 


The #1 pick for earnings growth in this sector is NVIDIA NASDAQ: NVDA. Analysts are forecasting another 110% top-line growth on top of the 100% growth posted last quarter and margins to widen. Earnings are expected to grow by 130% and substantially improve the balance sheet and cash position. Advanced Micro Devices NASDAQ: AMD will also have a good quarter if overshadowed by legacy businesses. Analysts forecast sequential and YoY acceleration to 6.7% top-line growth and wider margins, and the bar may be low due to recent revisions. 

Technology Sector XLK stock chart

Healthcare Has a Healthy Outlook for Growth 

Health Care Select Sector SPDR Fund Today

Health Care Select Sector SPDR Fund stock logo
XLVXLV 90-day performance
Health Care Select Sector SPDR Fund
$149.74
+1.11 (+0.75%)
(As of 01:16 PM ET)
52-Week Range
$122.59
$151.33
Dividend Yield
1.33%
Assets Under Management
$40.37 billion

The Healthcare Sector NYSEARCA: XLV has only a middling outlook for the year but is expected to post the 2nd strongest earnings growth this quarter and for annual earnings growth to double this year to next. The leading stocks in this group are Eli Lilly NYSE: LLY, UnitedHealth NYSE: UNH, and Johnson & Johnson NYSE: JNJ, accounting for roughly 35% of the holdings. The leading driver of the growth is Eli Lilly due to its position in the GLP-1 market. It is expected to post 20% top-line and 30% bottom-line growth this year, with revenue to advance 30% next year and earnings 50%. UNH and JNJ are expected to post growth in the single-digit range this year and accelerated low-double-digit growth next. 

Healthcare Sector XLV stock chart

Should you invest $1,000 in Communication Services Select Sector SPDR Fund right now?

Before you consider Communication Services Select Sector SPDR Fund, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Communication Services Select Sector SPDR Fund wasn't on the list.

While Communication Services Select Sector SPDR Fund currently has a "hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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Thomas Hughes
About The Author

Thomas Hughes

Contributing Author

Technical and Fundamental Analysis

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Johnson & Johnson (JNJ)
4.8335 of 5 stars
4.83 / 5 stars
$155.98+2.4%3.18%9.72Hold$173.00
UnitedHealth Group (UNH)
4.99 of 5 stars
4.99 / 5 stars
$558.35+0.7%1.50%34.13Buy$614.17
Eli Lilly and Company (LLY)
4.7683 of 5 stars
4.77 / 5 stars
$861.94-1.9%0.60%126.94Moderate Buy$858.72
Health Care Select Sector SPDR Fund (XLV)N/A$149.74+0.7%1.33%23.82N/AN/A
Technology Select Sector SPDR Fund (XLK)N/A$217.53-3.4%0.59%36.81HoldN/A
NVIDIA (NVDA)
4.9209 of 5 stars
4.92 / 5 stars
$116.18-5.2%0.03%67.94Moderate Buy$131.59
Advanced Micro Devices (AMD)
4.9209 of 5 stars
4.92 / 5 stars
$146.91-4.6%N/A216.05Moderate Buy$194.97
Microsoft (MSFT)
4.9159 of 5 stars
4.92 / 5 stars
$429.15-3.5%0.70%37.16Moderate Buy$485.53
Apple (AAPL)
4.8043 of 5 stars
4.80 / 5 stars
$217.91-3.2%0.46%33.89Moderate Buy$225.69
Communication Services Select Sector SPDR Fund (XLC)N/A$83.57-2.1%0.63%29.67N/AN/A
Meta Platforms (META)
3.7498 of 5 stars
3.75 / 5 stars
$466.61-4.5%0.43%26.80Moderate Buy$519.33
Alphabet (GOOGL)
4.1572 of 5 stars
4.16 / 5 stars
$172.89-4.9%0.46%26.52Moderate Buy$200.88
Communication Services Select Sector SPDR Fund (XLC)N/A$83.57-2.1%0.63%29.67N/AN/A
Compare These Stocks  Add These Stocks to My Watchlist 


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