It was another great week for the average stock as market leadership shifts away from tech

By Christine Idzelis and Isabel Wang

The S&P 500's tech sector just had its worst week in a year and a half, while an equal-weighted version of the index cemented a second-straight weekly advance

The average stock in the S&P 500 just had a decent week, although a slump in tech masked that shine at the index level.

Investors aren't bailing on the stock market, despite an ugly selloff in technology names this week that helped to saddle the S&P 500 with its worst weekly showing in months.

The S&P 500 SPX lost almost 2% even as the majority of the index's stocks actually advanced on the week. Seventy percent of stocks in the index posted weekly gains while 30% fell, according to Dow Jones Market Data. That helped the equal-weighted version of the index XX:SP500EW cement a second-straight week in the green. When the dust had settled, the S&P 500 had cemented its worst weekly showing since June, Dow Jones Market Data showed.

Following a powerful but narrow tech-led rally, this week's action offered the latest indication that market leadership is shifting once again. While tech stocks and some industrial names tied to the artificial-intelligence build-out slumped this week, the average stock in the increasingly top-heavy S&P 500 made it through a difficult week largely unscathed.

Defensive and interest-rate-sensitive areas of the market moved sharply higher this week, as stocks that had lagged over the past two months shot upward. This has given hard-hit corners of the market a chance to shine.

"Given that there's growing concerns around the AI trade and volatility in spending these companies are doing, it just makes sense for investors to broaden their view a little bit and look for other opportunities," said Anthony Saglimbene, chief market strategist at Ameriprise Financial, in a phone interview Friday. "Now money is rotating out of tech into areas that had been really depressed."

Certainly, it helped that interest rates in the bond market saw a big pullback from recent highs, providing some broad relief to stocks.

The Invesco S&P 500 Equal Weight ETF RSP, a popular exchange-traded fund that equally weights stocks in the index, rose 0.5% this week. By contrast, the S&P 500 saw its biggest weekly percentage drop since June 26.

The big drag on the S&P 500 is its largest sector, information technology XX:SP500.45, which was pummeled this week with a 6.4% drop. That left the tech sector with its biggest weekly loss since April 2025, according to Dow Jones Market Data. Meanwhile, seven of the S&P 500's 11 sectors saw weekly gains, FactSet data showed.

"Nobody really wants to be out of the market," said Steve Sosnick, chief strategist at Interactive Brokers, in a phone interview Friday. "If people were really genuinely concerned about the stock market right now, they'd be selling and not rushing to buy something else."

Among traditionally defensive areas of the stock market, the S&P 500's consumer-staples sector XX:SP500.30 surged 5% this week. Another defensive area, healthcare XX:SP500.35, had a big climb of 3.4%, while rate-sensitive stocks like materials XX:SP500.15 and utilities XX:SP500.55 also jumped sharply.

The decline in interest rates this week was significant, as the benchmark 10-year Treasury yield BX:TMUBMUSD10Y "backed off pretty dramatically," Saglimbene noted. The 10-year Treasury rate fell this week to 5.097% on Friday, locking in its biggest weekly pullback since February, according to Dow Jones Market Data. Bond yields move inversely with bond prices.

That's down from the 10-year rate's recent high of 5.31% on Oct. 5. Yields on 10-year and 30-year BX:TMUBMUSD30Y Treasurys have risen to their highest levels in decades this year.

"With some improvement on the rates front, people do feel it's safe to move some money back into rate-sensitive sectors like financials XX:SP500.40, industrials XX:SP500.20 and real estate XX:SP500.60," Sosnick said.

The yield on the 10-year Treasury dropped Thursday despite a hot reading on wholesale inflation from the producer-price index that same day, partly because "there was a bit of a flight-to-safety trade on top of it surrounding CoreWeave," Sosnick said - referring to the neocloud company (CRWV) whose stock tumbled this week on worries over its AI-related borrowing.

Tech had been the stock market's "safety trade," rising when Treasury yields were spiking in September, as investors appeared confident about the AI trade continuing to power higher despite higher rates, said Keith Lerner, CIO at Truist Wealth, by phone on Friday.

Last month, tech looked like "the only place in town," he noted, "while all these other areas were beat up." Now, it appears the tide has turned.

"Instead of a broad-based selloff across the board, you're just seeing a rotation from tech to everything else," Lerner said. "A rotational market is better than when money is broadly leaving the market."

-Christine Idzelis -Isabel Wang

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

10-17-26 0730ET