Key Highlights

  • The S&P 500 fell 59.72 points to 7,683.69, and only 125 of its 503 members advanced.
  • Reports that OpenAI paused Training of some frontier models hit chipmakers, and Meta slid after unveiling an enterprise AI platform.
  • Monday fit that pattern: money moved away from megacap tech and AI hardware and toward defensives.
  • Communication services, consumer discretionary, financials and industrials each fell harder than the S&P 500 itself.

With yields at multi-year highs and chip stocks sliding, money flowed into toothpaste, groceries and discount stores on Monday, September 28, making consumer staples the best-performing sector in the S&P 500.

A defensive day at the top

Consumer staples edged higher on Monday, September 28, and that modest gain was enough to top the leaderboard of the S&P 500's 11 sectors. Only three sectors rose at all: staples, health care and energy.

The contrast with the rest of the market was stark. The S&P 500 fell 59.72 points to 7,683.69, and only 125 of its 503 members advanced. Communication services, consumer discretionary, financials and industrials each fell harder than the S&P 500 itself.

Who led the charge

Reports named P&G (NYSE:PG) among staples gainers, and there was no company-specific news behind the move.

Grocers and discounters joined in. Kroger (NYSE:KR) rose, with one headline noting that investors were "bidding up Kroger and Dollar General." Reports named Dollar Tree (NASDAQ:DLTR), Altria (NYSE:MO) and Casey's (NASDAQ:CASY) among staples gainers, and Walmart (NASDAQ:WMT) edged up, per stockmarketwatch. Campbell's (NASDAQ:CPB) was among the three best performers in the entire S&P 500.

Even PepsiCo (NASDAQ:PEP) held steady despite a downgrade. Deutsche Bank's Steve Powers cut the stock to Hold from Buy and lowered his target to $138 from $155, arguing that "PEP appears caught between a cost structure built for higher growth and a consumer environment that remains structurally softer than expected." PepsiCo still finished slightly higher.

Why investors reach for staples

Consumer staples are companies that sell everyday necessities such as food, drinks, household goods and tobacco. Demand for these products tends to hold up in good times and bad, so investors often treat the sector as a shelter when Growth Stocks wobble.

Monday had plenty to shelter from. The 10-year Treasury Yield hit its highest level since 2007 after President Trump rejected Iran's plan to reopen the Strait of Hormuz and oil rose. Reports that OpenAI paused training of some frontier models hit chipmakers, and Meta (NASDAQ:META) slid after unveiling an enterprise AI platform. The Federal Reserve raised rates in September and futures price a majority chance of another hike in October.

Rotation beneath the surface

Schwab (NYSE:SCHW)'s Liz Ann Sonders has described how rotation and churn have hidden deep losses inside individual stocks. "So that's bear-market level declines. It's just happened through a process of churn and rotation," she said. Monday fit that pattern: money moved away from megacap tech and AI hardware and toward defensives.

Breadth underlined the caution. On the New York Stock Exchange, 2,054 stocks fell and 678 rose. BTIG's Jonathan Krinsky warned, "The divergence in the positive performance of the S&P 500 and extremely weak breadth is unsustainable. Something's gotta give."

Staples stay in favor if yields keep climbing

Staples could stay in favor if yields keep climbing, but they are not immune to rates. Many pay dividends, and higher bond yields offer investors competing income. The sector's Leadership on Monday came from a modest gain, not a surge.

The week's data will test the defensive trade. Consumer confidence and JOLTS arrive Tuesday, August PCE Inflation Wednesday, the ISM Manufacturing survey Thursday and the September jobs report Friday. Nike (NYSE:NKE), which was reported higher on Monday ahead of its results, reports this week alongside Carnival (NYSE:CCL), offering a fresh read on how consumers are spending beyond the essentials.