What's Driving Today's Communication Services Sector (XLC) Rally? 5 Stocks To Watch And What's Next

The Communication Services Select Sector SPDR Fund (ARCA: XLC) rallied nearly 6% on Thursday, on track to post its second-best performing session so far in 2023. 

The interactive media and services industry provided the greatest support to the sector performance, with Meta Platforms, Inc. (NASDAQ: META) rocketing nearly 15% on the strength of upbeat Q1 earnings and improved guidance. 
But that's not all: gains were widespread throughout a sector that includes social media giants, telecoms firms, and TV-entertainment stocks. As seen in the chart below, the Communication Services Select Sector SPDR Fund trades more than 30% below its all-time high of $86 per share, reached in September 2021. 

XLC Price Chart 

Five Major Contributors To The Communications Services Sector's Performance On Thursday

• Meta Platforms: META gained 14.7% and accounts for 22.6% of XLC holdings, adding about three percentage points to the overall performance. As a result, the social media business accounted for half of the sector's daily performance.
• Alphabet, Inc. (NASDAQ: GOOG) (NASDAQ: GOOGL): Alphabet rose 4.33% and accounts for 24.4% of XLC holdings, contributing for about one percentage point to the overall performance. 
• Comcast Corp. (NASDAQ: CMCSA): Comcast climbed 9.7% aided by higher-than-expected earnings and its weight is 4.3%, thus offering a performance contribution of 0.4%. 
• Charter Communication, Inc. (NASDAQ: CHTR): Charter Communication soared 7.3% on the day prior to its Q1 earnings report. The stock accounts for 3.9% of XLC holdings and consequently contributed 0.3% to the sector's daily performance.
• Verizon Communication Inc. (NASDAQ: VZ): Verizon climbed 4.7% and its weight is 4.2%, contributing 0.2% to performance. 

How Did the Sector Fare the Day After a >5% Daily Performance?

In the past five years, the Communications Services Sector, as monitored by the ETF XLC, had only nine sessions with daily gains greater than 5%.

The performance on the day after such a strong daily performance was mixed, although the results were influenced by the extreme volatility during March-April 2020. 

• Feb. 2, 2023: 6.6% gain followed by a 2% loss the next session. 

• Nov. 10, 2022: 6% gain followed by a 2.6% rise. 

• Apr. 6, 2020: 6.6% gain followed by a 0.7% rise.  

• Mar. 26, 2020: 5.7% gain followed by a 3.9% loss. 

• Mar. 24, 2020: 6.1% gain followed by a 1.4% loss.

• Mar. 13, 2020: 9% gain followed by a 11.2% loss.

• Mar. 10, 2020: 5.1% gain followed by a 4.3% loss. 

• Dec. 26, 2018: 5.6% gain followed by a 0.4% rise. 

Read next: Meta Platforms AI Initiatives And Reels Progress Praised By Analysts After 2022 Saw 'Hate Selling' Of Stock, Now A 'De-Risking Story'

Photo: Shutterstock