MW Stocks are swinging like crazy while the S&P 500 goes nowhere in 2026. Investors might not like what comes next.

By Joseph Adinolfi

Dispersion within the S&P 500 this year is approaching extremes seen during the dot-com era, according to Nomura

U.S. stocks are seeing some pretty crazy swings this year as the S&P 500 has been treading water.

At first blush, there doesn't appear to be a whole lot happening with the S&P 500 in 2026. As of Thursday afternoon, the index was essentially flat this year to date - not terrible, but not great.

But dig a little bit deeper, and it is a whole different story: Middling performance at the index level is masking chaotic swings churning just beneath the surface.

Software stocks have gotten slammed, and members of the highflying "Magnificent Seven" cohort have started to run out of steam. Meanwhile, sectors like energy, materials and consumer staples have raced ahead, a trend that continued to pick up steam this week.

David Lefkowitz, head of U.S. equities at UBS Global Wealth Management, told MarketWatch that since late last year, performance within the U.S. stock market has pretty much been turned on its head. The big winners from 2025 have become this year's laggards, and vice versa.

"We're seeing somewhat of a mirror image of what we saw last year, to a certain extent," Lefkowitz told MarketWatch in an interview.

                  S&P 500 Sector Performance 
          S&P 500 Sector         YTD % Change  2025 % Change 
   Information Technology                -3.83          23.31 
   Health Care                            0.97          12.53 
   Consumer Discretionary                -4.62           5.31 
   Industrials                           11.92           17.7 
   Energy                                22.34           4.96 
   Utilities                              6.34          12.69 
   Consumer Staples                      15.97           1.32 
   Financials                             -5.7          13.32 
   Communication Services                -0.89          32.41 
   Materials                             15.67           8.43 
   Real Estate                            7.56          -0.35 
   Source: FactSet 

The result is that more stocks are finally outperforming the index. Since the start of 2026, more than 60% of the individual stocks within the S&P 500 SPX have been beating the index, according to an analysis of data from FactSet.

That is a dramatic shift from 2023, 2024 and 2025, when that number hovered at around 30% or less. The last time investors saw such a dramatic shift was in 2001, just as the collapse of the dot-com bubble was starting to pick up steam.

While sputtering performance in the tech sector has heaped pressure on the index, other stocks have helped to at least partially offset their losses. On Wednesday, 99 stocks in the S&P 500 tallied fresh 52-week closing highs, the largest single-day reading since November 2024.

But while stock-market bulls have gushed about how this is a healthy rotation in leadership, some see reason for a more cautious approach.

'Just absolutely wild'

The dynamic has contributed to some pretty extreme dispersion happening under the surface of the S&P 500. Dispersion, in this instance, means that the gap between the biggest gainers in the index and the biggest losers has grown unusually wide.

While the S&P 500 has barely budged over the past month, its average member stock has registered a gain of more than 10%, according to Nomura's Charlie McElligott, who highlighted the trend in commentary shared with MarketWatch on Wednesday. Such a wide degree of dispersion is unusual: According to McElligott, it ranks in the 99th percentile over the past 30 years.

"Just absolutely wild," McElligott said.

This unusual situation might benefit investors engaged in active stock picking. After all, when more stocks are outperforming the index, it should be easier to outperform, Lefkowitz said. Unfortunately, investors might not like where things are heading.

McElligott ran the numbers and found that in the past, such extreme dispersion underneath the hood has preceded some major stock-market shocks - including the bursting of the dot-com bubble and the 2008 financial crisis. Following the eight previous instances where the average S&P 500 stock was outperforming the index by such a wide margin, the median one-year forward performance was a drop of 1.3%.

The fact that many S&P 500 stocks can be performing so well, while the index itself has struggled to break above 7,000, is a reflection of just how concentrated it had become over the past three years. In 2023 and 2024, the biggest stocks in the index - including members of the Magnificent Seven, a group of megacap stocks at the vanguard of the AI trade - did much of the heavy lifting.

While the rally started to broaden out more meaningfully in 2025, corporate behemoths like Nvidia (NVDA) still accounted for an outsize share of the index's gains.

At the peak late last year, the 10 largest stocks in the index accounted for roughly 40% of its total weighting, according to Goldman Sachs data. That was the most concentrated in decades.

For the first time since at least 1990, more than half of S&P 500 sectors were extremely overbought while the index itself isn't, according to analysts at Bespoke Investment Group. The S&P 500's largest sector by weighting - information technology XX:SP500.45 - isn't even trading above its 50-day moving average.

According to Bespoke, a sector index is extremely overbought when it is trading more than two standard deviations above its 50-day moving average, which underscores the speed of this shift.

Notably, stocks were in tumbling Thursday, including many of the sectors that previously had been doing well in 2026. The Dow Jones Transportation Average DJT was taking a hit on fears that AI could disrupt businesses focused on logistics.

The S&P 500 was off 1.1% in recent trade, at 6,863. Meanwhile, its equal-weighted sibling XX:SP500EW, which captures the performance of the average S&P 500 stock, was off 1.2%, FactSet data showed.

The Nasdaq Composite COMP was off 1.5%, while the Dow Jones Industrial Average DJIA, which had outperformed both the S&P 500 and the Nasdaq in 2026 due to its higher concentration of value stocks, was off more than 500 points at 49,593.

-Joseph Adinolfi

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

February 12, 2026 14:24 ET (19:24 GMT)

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