After a strong second quarter, the stock market carried its momentum into the third, with the artificial intelligence trade showing no signs of slowing. Mega-cap names including Apple AAPL<\/a>, Alphabet GOOGL<\/a>\/GOOG<\/a>, and Nvidia NVDA<\/a> powered the market to a 8.1% gain.<\/p>\n Of the 8.1% return on the Morningstar US Market Index<\/a>, 3.9 percentage points came from the technology sector\u2014more than double the amount added by the next-biggest contributor, communication services, which added 1.3 percentage points. Both sectors outperformed the market in the quarter; the Morningstar US Technology Index<\/a> gained 12.4%, while the Morningstar US Communication Services Index<\/a> gained 12.8%. In the year to date, the Technology Index is up 20.6% and the Communication Services Index is up 25.6%. That\u2019s close to double the 14.6% return on the US Market Index.<\/p>\n Best- and Worst-Performing Stocks The leading drag on the market in the quarter was the consumer defensive sector, which dropped 2.7% and detracted 0.1 percentage points from the overall return.<\/p>\n Looking at the nine Morningstar Style Box<\/a> categories, large blend stocks had the largest contribution at 3.6 percentage points, while large growth had the second-largest contribution at 2.3 points. The Morningstar US Large Core Index<\/a> gained 4.6% in the quarter, while the Morningstar US Large Growth Index<\/a> gained 6.7%.<\/p>\n The three small-cap style box indexes had the smallest impact on the US Market Index because of their low weightings, yet they were the quarter\u2019s top performers. Small growth returned 8.5%, small blend returned 8.1%, and small value returned 7.2%. Falling interest rates have primed small caps for strong returns, with small-cap tech\u2014particularly semiconductor firms such as Astera Labs ALAB<\/a> and Credo Technology CRDO<\/a>\u2014surging of late<\/a>. Mid-cap growth stocks performed worst in the quarter, climbing just 2.5%.<\/p>\n AI Stocks Lead Market Performance in Q3<\/p>\n Drilling into the areas with the most outsized impact in the third quarter\u2014tech, communication services, and large-blend stocks\u2014a common thread appears. A few major players capitalized by AI hype\u202fcontinued to carry the market.<\/p>\n All of the top 10 contributors are major AI players. Led by Apple and Alphabet, which each added 1.3 percentage points to the market\u2019s return, these ten contributors accounted for 5.5 of the 8.1 percentage points gained by the US market index in the third quarter.<\/p>\n Apple\u2019s share price got a boost following its pledge to invest an additional $100 billion in the US, primarily in the manufacturing of semiconductors and glass for iPhones. \u201cWe expect this announcement to secure a long-term exemption from US import tariffs for Apple,\u201d wrote<\/a> Morningstar senior equity analyst William Kerwin<\/a>. \u201cApple holds significant manufacturing exposure in China and India, and we believe it needed to placate the Trump administration with US investment to avoid costly tariffs.\u201d<\/p>\n Alphabet saw its share price jump on news in the Google Search antitrust case that it won\u2019t be required to divest Chrome or Android. \u201cThe Google Search case has been hanging over Alphabet\u2019s head,\u201d wrote<\/a> Morningstar analyst Malik Ahmed Khan<\/a> following the ruling. \u201cWith this ruling, investors can breathe a sigh of relief, knowing that US District Judge Amit Mehta did not propose structural remedies that could have been value-destructive. With shares jumping 7% following the decision, we now view Alphabet as fairly valued, with the stock up more than 50% from its April lows.\u201d<\/p>\n Consumer Defensives and Netflix Struggle in Q3<\/p>\n Consumer defensives constituted the only sector with a negative overall impact on returns in the quarter, falling 2.7% and detracting 0.1 points. Among the leading drags from the sector were Costco COST<\/a> and Philip Morris PM<\/a>, which each detracted 0.05 points.<\/p>\n Real estate posted the second-lowest return in the third quarter at 3.2%, though the sector holds just a 2.3% weight in the market index. The sector\u2019s biggest drag came from American Tower AMT<\/a>, which cut 0.02 percentage points from the market\u2019s return.<\/p>\n![\"The](\"https:\/\/www.europesays.com\/ie\/wp-content\/uploads\/2025\/10\/YSJIQ7OIKJFFXF3SDEVORL4KFA.jpg\")
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