MW The S&P 500 is caught in an extremely narrow trading range. What's happening beneath the surface could decide where the index goes next.

By Joseph Adinolfi

The S&P 500's rolling 30-day trading range is at its lowest level since October 2018

The S&P 500 is caught in its narrowest trading range since 2018.

Software stocks have sunk. Defensive names, including consumer staples stocks like Walmart and Costco, have rallied. Yet, despite all of the chaotic moves seen in the U.S. equity market over the past few months, the S&P 500 has remained remarkably steady.

The index on Wednesday was trading only marginally above its October peak - at the time, that was its highest level on record. It came despite huge swings beneath the surface. The index is up just 1.4% year-to-date. Over the past 30 trading sessions, the S&P 500 SPX has been stuck in its narrowest trading range since October 2018. Through Feb. 20, the range between the S&P 500's year-to-date high and year-to-date low was just 2.7%, the narrowest since 1966, according to analysts at Bespoke Investment Group.

But the performance between the index's best and worst sectors has been notably varied, and nearly a mirror image of what investors saw in 2025: The worst-performing sector, financial services, is down more than 5%. Information technology, which helped power much of the index's gains over the past three years, is off by 1.6%.

Meanwhile, the top-performing sectors - energy, materials and consumer staples - are up 22%, 17.2% and 14.6%, respectively.

"Someone described it in our investment policy meeting this morning as like a duck," said Aaron Clark, a portfolio manager at GW&K Investment Management. "It looks like it's just calmly moving along, but beneath the surface, there's a lot going on."

'HALO'

While the S&P 500 hasn't moved much, its equal-weighted sibling has raced ahead. Software stocks have gotten hammered, and megacap names like Amazon and even Nvidia have struggled. But companies involved in old-economy businesses - like retailing, oil and gas extraction and home building - have seen their shares soar.

A new acronym has emerged to describe what is working in the U.S. stock market these days: "HALO" - according to Clark, it means "hard assets, low obsolescence" risk.

The thinking is that companies like McDonald's $(MCD)$, Exxon Mobil (XOM) and Caterpillar $(CAT)$ are less likely to see their business models disrupted by the increasing adoption of technology.

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

Outside of the U.S., stocks have been chugging along, with indexes in South Korea, Europe and elsewhere hitting record highs.

Trading places

J.C. Parets, a market technician and founder of TrendLabs, said the level of dispersion between winners and losers in the U.S. equity market has been looking pretty extreme lately.

"It's not good or bad, bearish or bullish. It's just different," Parets said. That being said, for the bull market to continue, the S&P 500 needs at least some participation from Big Tech names like Microsoft $(MSFT)$ and Nvidia (NVDA).

While the "Magnificent Seven" and software names have struggled, investors appear to be moving their money into other corners of the U.S. equity market.

Since the start of the year, members of the Magnificent Seven group of megacap stocks have shed a combined $827 billion in market value, according to Dow Jones Market Data.

Over the same period, stocks in the energy, materials and consumer-staples sectors have tacked on another $979 billion, according to Dow Jones Market Data. The tech sector still dwarfs these other three. Tech stocks in the S&P 500 have a combined market capitalization of more than $19 trillion as of Wednesday's close. Energy, materials and consumer-staples stocks combined are worth less than $6.5 trillion.

A punishing selloff in software names has weighed on the broader tech sector, even as semiconductor stocks have continued to perform quite well. But as shares of Walmart $(WMT)$, Costco $(COST)$ and other members of the consumer staples sector have zoomed higher, the forward price-to-earnings multiple for the sector - a popular valuation metric used by investment analysts - has surpassed that of tech.

Michael Toomey, managing director of equities trading at Jefferies, said that over the past four months, the tech sector's price-to-earnings multiple has collapsed at the fastest pace since at least 2006, on a rolling four-month basis.

Toomey said tech stocks might be nearing the end of this rout.

"I think we could look back at this week as an inflection point for Tech," Toomey said in commentary shared with MarketWatch.

U.S. stocks were mixed early Thursday, with the S&P 500, Nasdaq composite and Dow Jones Industrial Average teetering on the cusp of a weekly loss.

Michael DeStefano and Chelsea Ng contributed

-Joseph Adinolfi

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(END) Dow Jones Newswires

February 26, 2026 11:33 ET (16:33 GMT)

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