Mega Caps Cushion Communication Services as Sector Breadth Weakens

On Tuesday, September 8, the Communication Services sector showed narrow internal support, with only 22.2% of its member stocks posting gains. The cap-weighted sector move finished at -0.2%, while the equal-weighted version stood at -0.8%, indicating that larger holdings buffered the group from wider selling. The Communication Services Select Sector SPDR Fund, an exchange-traded fund that tracks the group under the ticker XLC, closed -0.4% at $111.55. The sector's drift lower tracked broader market weakness, where 2 of the 11 sectors rose as oil price gains tied to Middle East conflict pushed broader equities lower amid rising interest rate expectations.

Individual stock moves across the group diverged around company news. EchoStar Corporation (+4.0%) led the sector after an analyst resumed coverage with a Buy rating, pointing to value in its SpaceX holdings alongside the company's petition to review federal limits on a $2.4 billion trust fund. Verizon Communications Inc (+0.5%) also gained ground following a multibillion-dollar optical fiber agreement extending through 2032 to support broadband expansion and artificial intelligence infrastructure. Conversely, Charter Communications Inc (-4.1%) was the weakest performer in the sector, though our sources show no reported driver for the decline.

For investors using XLC as a vehicle, EasyAlpha grades 87.3% of the fund's $22.4 billion in assets. The portfolio's underlying quality is concentrated, with 28.9% of that graded weight receiving an A or B quality grade. EasyAlpha grades companies against their industry peers; those in the A and B tiers reflect stronger fundamentals and have historically experienced smaller drawdowns than companies graded D or E.

Over longer stretches, the sector has struggled for sustained traction. While XLC is +0.3% over the past month, the fund sits at -5.0% over the past six months, -6.1% across the last hundred sessions, and -2.8% over the past twelve months.