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Here are total returns, with dividends reinvested, for the 11 sectors of the S&P 500, with broad indexes below. The sectors are sorted by ascending total returns this year through Monday.

Sector or index	2023 return	2022 return	Return since end of 2021	1 week return	1 month return
Utilities	-18.4%	1.6%	-17.2%	-11.1%	-9.6%
Real Estate	-7.1%	-26.1%	-31.4%	-3.0%	-8.8%
Consumer Staples	-5.4%	-0.6%	-6.0%	-2.2%	-4.4%
Healthcare	-4.2%	-2.0%	-6.1%	-1.7%	-3.3%
Financials	-2.5%	-10.5%	-12.7%	-2.5%	-4.7%
Materials	1.3%	-12.3%	-11.2%	-1.9%	-7.0%
Industrials	3.5%	-5.5%	-2.1%	-1.8%	-7.3%
Energy	4.0%	65.7%	72.4%	-1.9%	-1.4%
Consumer Discretionary	27.0%	-37.0%	-20.0%	-0.6%	-5.2%
Information Technology	36.5%	-28.2%	-2.0%	0.8%	-5.9%
Communication Services	42.5%	-39.9%	-14.3%	1.1%	-1.3%
S&P 500	13.1%	-18.1%	-7.4%	-1.1%	-4.9%
DJ Industrial Average	2.5%	-6.9%	-4.5%	-1.7%	-4.0%
Nasdaq Composite Index COMP	28.0%	-32.5%	-13.7%	0.3%	-5.1%
Nasdaq-100 Index	36.5%	-32.4%	-7.7%	0.5%	-4.2%
Source: FactSet

Returns for 2022 are also included, along with those since the end of 2021. Last year’s weakest sector, communications services, has been this year’s strongest performer. This sector includes Alphabet Inc.
GOOGL
and Meta Platforms Inc.
META,
which have returned 52% and 155% this year, respectively, but are still down since the end of 2021. To the right are returns for the past week and month through Monday.

On Monday, the S&P 500 Utilities sector had its worst one-day performance since 2020, with a 4.7% decline. Investors were reacting to the jump in long-term interest rates.

Here is a link to the U.S. Treasury Department’s summary of the daily yield curve across maturities for Treasury securities.

The yield on 10-year U.S. Treasury notes

jumped 10 basis points in only one day to 4.69% on Monday. A month earlier the 10-year yield was only 4.27%. Also on Monday, the yield on 20-year Treasury bonds

rose to 5.00% from 4.92% on Friday. It was up from 4.56% a month earlier.

Market Extra: Bond investors feel the heat as popular fixed-income ETF suffers lowest close since 2007

The Treasury yield curve is still inverted, with 3-month T-bills

yielding 5.62% on Monday, but that was up only slightly from a month earlier. An inverted yield curve has traditionally signaled that bond investors expect a recession within a year and a lowering of interest rates by the Federal Reserve. Demand for bonds pushes their prices down. But the reverse has happened over recent days, with the selling of longer-term Treasury securities pushing yields up rapidly.

Another way to illustrate the phenomenon is to look at how the Federal Reserve has shifted the U.S. money supply. Odeon Capital analyst Dick Bove wrote in a note to clients on Friday that “the Federal Reserve has not deviated from its policy to defeat inflation by tightening monetary policy,” as it has shrunk its balance sheet (mostly Treasury securities) to $8.1 trillion from $9 trillion in March 2022. He added: “The M2 money supply was $21.8 trillion in March 2022; today it is $20.8 trillion. You cannot get tighter than these numbers indicate.”

Then on Tuesday, Bove illustrated the Fed’s tightening and the movement of the 10-year yield with two charts:

Bove said he believes the bond market has gotten it wrong, with the inverted yield curve reflecting expectations of rate cuts next year. If he is correct, investors can expect longer-term yields to keep shooting up and a normalization of the yield curve.

This has set up a brutal environment for utility stocks, which are typically desired by investors who are seeking dividend income. In a market in which you can receive a yield of 5.5% with little risk over the short term, and in which you can lock in a long-term yield of about 5%, why take a risk in the stock market? And if you believe that the core inflation rate of 3.7% makes a 5% yield seem paltry, keep in mind that not all investors think the same way. Many worry less about the inflation rate because large components of official inflation calculations, such as home prices and car prices, don’t affect everyone every year.

We cannot know when this current selloff of longer-term bonds will end, or how much of an effect it will have on the stock market. But sharp declines in the stock market can set up attractive price points for investors looking to go in for the long haul.

Screening for lower valuations and high ratings

A combination of rising earnings estimates and price declines could shed light on potential buying opportunities, based on forward price-to-earnings ratios.

Let’s look at the sectors again, in the same order, this time to show their forward P/E ratios, based on weighted rolling 12-month consensus estimates for earnings per share among analysts polled by FactSet:

Sector or index	Current P/E to 5-year average	Current P/E to 10-year average	Current P/E to 15-year average	Forward P/E	5-year average P/E	10-year average P/E	15-year average P/E
Utilities	82%	86%	95%	14.99	18.30	17.40	15.82
Real Estate	76%	80%	81%	15.19	19.86	18.89	18.72
Consumer Staples	93%	96%	105%	18.61	19.92	19.30	17.64
Healthcare	103%	104%	115%	16.99	16.46	16.34	14.72
Financials	88%	92%	97%	12.90	14.65	14.08	13.26
Materials	100%	103%	111%	16.91	16.98	16.42	15.27
Industrials	88%	96%	105%	17.38	19.84	18.16	16.56
Energy	106%	63%	73%	11.78	11.17	18.80	16.23
Consumer Discretionary	79%	95%	109%	24.09	30.41	25.39	22.10
Information Technology	109%	130%	146%	24.20	22.17	18.55	16.54
Communication Services	86%	86%	94%	16.41	19.09	19.00	17.43
S&P 500	94%	101%	112%	17.94	19.01	17.76	16.04
DJ Industrial Average	93%	98%	107%	16.25	17.49	16.54	15.17
Nasdaq Composite Index	92%	102%	102%	24.62	26.71	24.18	24.18
Nasdaq-100 Index	97%	110%	126%	24.40	25.23	22.14	19.43

There is a limit to how many columns we can show in the table. The S&P 500’s forward P/E ratio is now 17.94, compared with 16.79 at the end of 2022 and 21.53 at the end of 2021. The benchmark index’s P/E is above its 10- and 15-year average levels but below the five-year average.

If we compare the current sector P/E numbers to 5-, 10- and 15-year averages, we can see that the current levels are below all three averages for four sectors: utilities, real estate, financials and communications services. The first three face obvious difficulties as they adjust to the rising-rate environment, while the real-estate sector reels from continuing low usage rates for office buildings, from the change in behavior brought about by the COVID-19 pandemic.

Your own opinions, along with the pricing for some sectors, might drive some investment choices.

A broader screen of the S&P 500 might point to companies for you to research further.

We narrowed the S&P 500 as follows:

• Current forward P/E below 5-, 10- and 15-year average valuations. For stocks with negative earnings-per-share estimates for the next 12 months, there is no forward P/E ratio so they were excluded. For stocks listed for less than 15 years, we required at least a 5-year average P/E for comparison. This brought the list down to 138 companies.

• “Buy” or equivalent ratings from at least two-thirds of analysts: 41 companies.

Here are the 20 companies that passed the screen, for which analysts’ price targets imply the highest upside potential over the next 12 months.

There is too much data for one table, so first we will show the P/E information:

Company	Ticker	Current P/E to 5-year average	Current P/E to 10-year average	Current P/E to 15-year average
SolarEdge Technologies Inc.	SEDG	89%	N/A	N/A
AES Corp.	AES	66%	75%	90%
Insulet Corp.	PODD	18%	N/A	N/A
United Airlines Holdings Inc.	UAL	42%	50%	N/A
Alaska Air Group Inc.	ALK	51%	57%	N/A
Tapestry Inc.	TPR	39%	49%	70%
Albemarle Corp.	ALB	39%	50%	73%
Delta Air Lines Inc.	DAL	60%	63%	21%
Alexandria Real Estate Equities Inc.	ARE	59%	68%	N/A
Las Vegas Sands Corp.	LVS	96%	78%	53%
Paycom Software Inc.	PAYC	61%	N/A	N/A
PayPal Holdings Inc.	PYPL	33%	N/A	N/A
SBA Communications Corp. Class A	SBAC	27%	N/A	N/A
Advanced Micro Devices Inc.	AMD	58%	39%	N/A
LKQ Corp.	LKQ	92%	44%	78%
Charles Schwab Corp.	SCHW	75%	54%	73%
PulteGroup Inc.	PHM	94%	47%	N/A
Lamb Weston Holdings Inc.	LW	71%	N/A	N/A
News Corp Class A	NWSA	93%	73%	N/A
CVS Health Corp.	CVS	75%	61%	67%
Source: FactSet

Click on the tickers for more about each company or index.

Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

News Corp
NWSA
is on the list. The company owns Dow Jones, which in turn owns MarketWatch.

Here’s the list again, with ratings and consensus price-target information:

Company	Ticker	Share “buy” ratings	Oct. 2 price	Consensus price target	Implied 12-month upside potential
SolarEdge Technologies Inc.	SEDG	74%	$122.56	$268.77	119%
AES Corp.	AES	79%	$14.16	$25.60	81%
Insulet Corp.	PODD	68%	$165.04	$279.00	69%
United Airlines Holdings Inc.	UAL	71%	$41.62	$69.52	67%
Alaska Air Group Inc.	ALK	87%	$36.83	$61.31	66%
Tapestry Inc.	TPR	75%	$28.58	$46.21	62%
Albemarle Corp.	ALB	81%	$162.41	$259.95	60%
Delta Air Lines Inc.	DAL	95%	$36.45	$58.11	59%
Alexandria Real Estate Equities Inc.	ARE	100%	$98.18	$149.45	52%
Las Vegas Sands Corp.	LVS	72%	$45.70	$68.15	49%
Paycom Software Inc.	PAYC	77%	$260.04	$384.89	48%
PayPal Holdings Inc.	PYPL	69%	$58.56	$86.38	48%
SBA Communications Corp. Class A	SBAC	68%	$198.24	$276.69	40%
Advanced Micro Devices Inc.	AMD	74%	$103.27	$143.07	39%
LKQ Corp.	LKQ	82%	$49.13	$67.13	37%
Charles Schwab Corp.	SCHW	77%	$53.55	$72.67	36%
PulteGroup Inc.	PHM	81%	$73.22	$98.60	35%
Lamb Weston Holdings Inc.	LW	100%	$92.23	$123.50	34%
News Corp Class A	NWSA	78%	$20.00	$26.42	32%
CVS Health Corp.	CVS	77%	$69.69	$90.88	30%
Source: FactSet

A year may actually be a short period for a long-term investor, but 12-month price targets are the norm for analysts working for brokerage companies.

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