Something bad may be happening under the hood of the stock market. Warren Pies, founder of 3Fourteen Research, noted Monday that consumer staples and energy are each up more than 10% over the past quarter — while financials and technology are lower. These divergences have only occurred twice, in 1990 after Iraq invaded Kuwait and 2000 when the dot-com bubble burst, and the broad market has struggled afterward. The S & P 500 on average lost 6.9% over the following two quarters after both these instances. After the 1990 divergence, it fell 2.1% over two quarters. It tumbled 11.6% in the two quarters after the 2000 occurrence, Pies found. “The market has lost momentum. It is in this trading range … and there’s been a really unhealthy rotation,” Pies told CNBC’s ” Closing Bell ” on Monday. Energy and consumer staples stocks are off to a strong start for the year. The former is up nearly 23% just since New Year’s, making it the best-performing S & P 500 sector, while the latter has popped almost 15%. Pies noted that he remains bullish on stocks overall for the year. He pointed to the likelihood of the Federal Reserve lowering its benchmark lending rate at some point in 2026, while corporate earnings grow by at least 10%. “In modern history, there’s never been a down year with that combination,” he said Monday. But, “it has to be tech led. You cannot get out of this with tech and financials continuing to [underperform]” The S & P 500 tech sector is down more than 4% year to date. Financials have shed 7.7% — the worst-performing sector.
Defensive stock outperformance is flashing a warning sign for the stock market
Feb 24, 2026
