Third Quarter in U.S. Stock Funds: Pressing On, Regardless

U.S. stocks fended off various challenges in 2018's third quarter, bolstered by the strength of the domestic economy.

International stocks, especially in emerging markets, struggled in the third quarter because of tariff tiffs, currency moves, and political and economic disruptions. Back home, however, the story was different. The S&P 500 closed at an all-time high on Sept. 20 and spent much of the quarter in record-high territory. The index posted a solid 7.4% total return for the quarter. Investors showed their love for good growth stories by driving

For many investors, the strength of the U.S. economy offered reasons for optimism. August's unemployment rate was 3.9%--a low not seen since December 2000. Another quarter-point Federal Reserve rate hike in September still left interest rates historically low. Despite the international backdrop, the U.S. economy continued the run it started 10 Septembers ago after the global financial crisis.

Winners

Healthcare was the third quarter's top-performing sector, pushing

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newsletter that meet or clear some fundamental hurdles) with a 12.9% quarterly gain through Sept. 27. Pharmaceuticals drove the strong performance, led by healthy gains in large caps such as

Gold-rated

Silver-rated

Losers The Fed's rate hike added pressure to rate-sensitive sectors such as real estate, and that drove Fidelity Event Driven Opportunities FARNX down 1.7% in the period. Real estate firms took up nearly a fourth of the July 2018 portfolio. That included CorePoint Lodging CPLG, one of the fund's top holdings, whose shares dropped nearly 25%. The company, which had its initial public offering in June 2018, owns a collection of midtier hotels. Real estate wasn't the whole story here, however. Diebold Nixdorf DBD, the automated-teller-machine specialist, shed over 60% of its value as it continued to struggle with its 2016 Nixdorf acquisition.

It wasn't all sunshine in the world of technology strategies, either. T. Rowe Price Science and Technology PRSCX limped to a 1.5% decline. Worries about China's economy dragged down

Finally, tiny Perritt MicroCap Opportunities PRCGX didn't benefit from the good market for smaller companies. The $180 million fund fell 2.8% despite the portfolio's sector diversification across industrials, financials, technology, and basic materials. BlueLinx Holdings BXC, a building products distributor and a top-five holding, lost 15%--but the stock has more than tripled since Jan. 1. Construction project manager Hill International dropped over 30% following news of a delay in the company's SEC reporting and a delisting from the New York Stock Exchange.

For all Morningstar Category returns through the previous day, visit the Fund Category Performance page.