The industrial sector has emerged as one of Wall Street’s strongest performers in 2026, benefiting from a combination of infrastructure spending, defense demand and the rapid expansion of artificial intelligence (AI)-related investments. The State Street Industrial Select Sector SPDR ETF (XLI), a widely followed benchmark for the sector, has gained 13.2% through June 11, outperforming many cyclical areas of the market and attracting significant investor interest.

Several other economic indicators also bear testimony to this performance. Industrial production rose 1.4% year over year in April, accelerating from 0.8% in March, while manufacturing output increased 1.3%. Capacity utilization improved to 76.1%, indicating stronger factory activity. Manufacturing surveys have also been robust, with the S&P Global Manufacturing PMI reaching 55.1 in May, its highest level since 2022, and the ISM Manufacturing PMI climbing to 54.0. New orders strengthened to 56.8, reflecting healthy demand, while strong payroll growth and resilient economic activity have supported industrial companies despite higher interest rates and geopolitical uncertainties. Moog Inc. (MOG.A Quick QuoteMOG.A - Free Report) , Constellium SE (CSTM Quick QuoteCSTM - Free Report) , Valmont Industries, Inc. (VMI Quick QuoteVMI - Free Report) and Kaiser Aluminum Corporation (KALU Quick QuoteKALU - Free Report) are four stocks that have benefited.

Infrastructure Spending Provides a Strong Foundation

A major driver of the sector’s strength has been the continued flow of U.S. infrastructure spending into transportation, construction, energy and manufacturing projects. Industrial companies have benefited from growing project backlogs and rising demand for machinery, electrical equipment and engineering services. These investments have created a favorable environment for large industrial firms, supporting revenue growth and improving earnings visibility.

AI Boom Extends Beyond Technology Stocks

While technology companies often receive most of the attention in the AI revolution, industrial firms have also benefited. The construction of AI data centers and the expansion of electrical grids have increased demand for power equipment, engineering services and industrial infrastructure. Companies involved in electrification, grid modernization and large-scale construction projects have seen particularly strong investor interest.

Defense and Aerospace Add Momentum

Another important catalyst has been strong performance in aerospace and defense stocks. Rising geopolitical tensions and increased military spending across several regions have boosted demand for defense equipment and aerospace products. Since aerospace and defense represent one of the largest industry groups within XLI, gains in these areas have contributed significantly to the ETF’s overall performance.

Investors Rotate Toward Cyclical Strength

Investor sentiment has also shifted in favor of industrial companies as concerns about stretched technology valuations prompted broader sector diversification. Fund flows into industrial-sector investments have remained positive, reflecting confidence in the sector’s earnings outlook and exposure to long-term economic themes. Even during periods of market volatility, industrials have often led market rebounds, highlighting their growing importance in the current bull market.

Our Choices

The stocks below flaunt a Zacks Rank #1 (Strong Buy) or Rank #2 (Buy). The search was also narrowed down with a VGM Score of A or B. Here, V stands for Value, G for Growth and M for Momentum. The score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here.

Moog develops precision motion-control and fluid-control systems for aerospace, defense, and industrial markets. MOG.A’s expected earnings growth rate for the current year is 22.1%. The Zacks Consensus Estimate for its current-year earnings has improved 3.5% over the past 60 days. This Zacks Rank #2 company has a VGM Score of B.

Constellium designs and produces rolled, extruded aluminum products for aerospace, automotive, packaging and industrial markets. CSTM’s expected earnings growth rate for the current year is 74%. The Zacks Consensus Estimate for its current-year earnings has increased 61.4% over the past 60 days. This Zacks Rank #1 company has a VGM Score of A.

Valmont manufactures infrastructure and agricultural products, including utility structures, coatings, irrigation systems and related services, across global markets. VMI’s expected earnings growth rate for the current year is 19.6%. The Zacks Consensus Estimate for its current-year earnings has increased 3.7% over the past 60 days. This Zacks Rank #2 company has a VGM Score of B.

Kaiser Aluminum produces specialty aluminum products for aerospace, automotive, packaging, and industrial applications. KALU’s expected earnings growth rate for the current year is 44.1%. The Zacks Consensus Estimate for its current-year earnings has increased 18.6% over the past 60 days. This Zacks Rank #1 company has a VGM Score of B.

Bottom Line

The industrial sector appears well-positioned to benefit from continued infrastructure investment, AI-related capital spending and defense demand. While economic slowdowns or manufacturing weakness could create short-term volatility, the sector’s fundamental drivers remain intact, suggesting industrial stocks could continue to play a leadership role on Wall Street through the remainder of 2026.