Despite a broad consensus on the response of US stock market vola-tility to the coronavirus outbreak, our micro-level understanding of its variation across industries still needs to be improved. This study contributes to the existing literature by providing an industry-level analy-sis of the COVID-19 pandemic with two different states. Evidence from the MS-CAPM model indicates the role of portfolio diversification. Specifically, the results reveal that some industries, such as materials, real estate, communication, and utilities, have much higher expected returns. On the other hand, other sectors, including consumer discre-tionary, industrials, and information technology, become less volatile than the market during the lockdown period.