Tech and Telecom Take Charge as Real Estate Slumps: Weekly Sector ETF Recap

Market Overview

Markets leaned modestly bullish last week as investors digested a slew of economic data and recalibrated expectations for interest rate policy. The Communication Services and Technology sectors led the pack, buoyed by momentum in megacap names and a resurgence in risk-on sentiment. Meanwhile, defensive and interest-rate-sensitive sectors like Real Estate and Consumer Staples underperformed, reflecting the market’s cautious optimism about the economy but lingering concerns about sticky inflation and long-term yields.

Despite only modest gains in broader indices, sector-level dispersion was significant — suggesting an ongoing rotation out of defensive safe havens and into growth-oriented sectors.

Top 3 Sector ETF Gainers

• Communication Services Select Sector SPDR Fund (XLC) +3.53% Sector: Communication Services Communication Services surged to the top of the leaderboard, driven by strength in major players like Meta and Alphabet. Investor appetite returned to digital advertising and streaming names, buoyed by better-than-expected ad spending data and excitement around AI-powered platforms. The sector's rebound suggests growing risk tolerance, particularly for tech-adjacent communication stocks.

• Technology Select Sector SPDR Fund (XLK) +2.84% Sector: Technology The Technology sector remained a market darling, continuing its strong 2025 performance. Semiconductors and cloud stocks saw robust buying as investors bet on resilient earnings and long-term demand for AI infrastructure. Lower-than-expected jobless claims also reduced recession fears, encouraging bullishness in cyclical tech.

• Financial Select Sector SPDR Fund (XLF) +1.74% Sector: Financials Financials saw solid gains, helped by a steeper yield curve and stronger-than-forecast bank lending activity. As the Fed maintains a data-dependent stance, the financial sector is benefiting from expectations of rate stability and renewed investor interest in economically sensitive stocks.

Bottom 3 Sector ETF Decliners

• Real Estate Select Sector SPDR Fund (XLRE) -2.84% Sector: Real Estate Real Estate was the week’s biggest laggard, hurt by persistent pressure from higher long-term interest rates. REITs, particularly in the office and commercial property space, continue to struggle with valuation compression and concerns over refinancing costs. Elevated Treasury yields remain a key headwind.

• Consumer Staples Select Sector SPDR Fund (XLP) -1.00% Sector: Consumer Staples Consumer Staples slipped as investors rotated out of defensives. Although the sector provides stability, it lacks near-term growth catalysts. Retailers and food & beverage giants underperformed, weighed down by margin pressures and flat volume growth.

• Utilities Select Sector SPDR Fund (XLU) -0.69% Sector: Utilities Another defensive casualty, Utilities posted modest losses. Rising bond yields and a lack of earnings momentum weighed on the sector. Utilities tend to underperform in rate-sensitive environments, especially when investors have better growth alternatives elsewhere.

Sector Rotation Insight

This week’s action reflected a mild risk-on rotation, favoring growth-heavy and economically sensitive sectors like Tech, Communications, and Financials. Meanwhile, defensive plays — Real Estate, Utilities, and Staples — faced outflows amid reduced recession fears and rising long-term yields.

Investor takeaway: With markets favoring earnings growth and innovation over stability, investors may consider recalibrating toward sectors with stronger earnings momentum — though rate-sensitive segments still warrant caution as Fed policy evolves.