Communication Services Drops as Mega-Caps Drive Sector Losses

The Communication Services sector recorded -1.8% on Wednesday, September 23, with mega-cap constituents driving the day's weakness as equal-weighted performance finished at -0.8%. Breadth inside the sector remained narrow, with 42.1% of member stocks advancing, while only 31.7% of the graded weight in the exchange-traded fund Communication Services Select Sector SPDR Fund (XLC) sits in top-tier A or B quality grades. The decline came as strong business-activity data lifted Treasury yields and revived interest rate hike expectations.

Selling pressure was broad across the market, where 1 of the 11 sectors rose. A survey showed private-sector output accelerating to a 62-month high. At the same time, crude oil prices rose nearly 4% amid Middle East tensions. The combination of higher borrowing costs and energy prices weighed heavily on major equity indexes throughout the session.

Inside the sector, performance split between select gainers and broader decliners. T-Mobile US Inc topped the group at +2.0%, while Meta Platforms Inc. logged +1.0%, with our sources showing no reported company-specific catalyst for either advance. Those advances could not offset the drag from the rest of the group, where News Corp A posted -3.9% amid broad-based selling that kept the wider sector under pressure.

The exchange-traded fund XLC closed -0.9% at $112.56, reflecting the day's losses across the 87.1% of fund assets EasyAlpha grades. Over longer horizons, XLC is -3.6% over the past 100 sessions, stands at +0.2% over the past month, shows +1.0% over the past six months, and sits at -4.9% over the trailing twelve months.