Tech Sector Stalls as Rotation Accelerates: Why Utilities and Industrials Are Back in Vogue

It’s been a long time since the phrase “flight to safety” meant anything in the world of equities. But here we are, February 2026, and the S&P 500’s tech darlings are suddenly the market’s punching bag. The MoneyShow Table of the Day, as cited by Seeking Alpha, shows seven out of eleven S&P sector ETFs are green, but technology is conspicuously not among them. The rotation is real, and the numbers are starting to look like a slow-motion margin call on the entire AI narrative.

You could blame the usual suspects: stretched valuations, a $1 trillion rout in the big names, or the fact that every fund manager under 40 has been hiding in the same three stocks for the last two years. But the real story is more nuanced. As Goldman Sachs warns of more selling this week, and utilities stocks flash warning signs of their own, the market is sending a very clear message: the easy money in tech is gone, and the crowd is moving on.

Let’s get granular. XLK, the Technology Select Sector SPDR Fund, is parked at $141.06, flat as a pancake, while defensive sectors like utilities and industrials are quietly climbing the wall of worry. The S&P’s rotation out of tech isn’t just a headline, it’s showing up in flows, in options positioning, and in the way CTAs are lining up to hit the sell button if the S&P 500 loses its grip on key support. Goldman’s Gail Hafif is already warning that systematic sellers could accelerate the pain if the index stumbles.

Meanwhile, the macro backdrop is anything but tranquil. Treasury yields are ticking higher, the delayed January jobs report looms, and Friday’s CPI print is the kind of event that can turn a sector rotation into a full-blown stampede. Wall Street is bracing for an inflation surprise, with the WSJ noting that January price spikes are practically tradition at this point. Add in the specter of tariffs and you have all the ingredients for a market that’s ready to punish crowded trades.

In the context of the last decade’s tech dominance, this rotation feels almost heretical. But the numbers don’t lie. The S&P’s tech weighting is still near record highs, but that’s a function of past performance, not future promise. The real action is happening in the sectors nobody wanted to touch in 2023, utilities, industrials, even old-school consumer staples. It’s not sexy, but it’s working.

The historical analog here isn’t the dot-com bust, but the post-2011 grind, when capital rotated from growth to value in fits and starts. Back then, the narrative was about “rebalancing for the new normal.” Today, it’s about survival. The algos don’t care about your conviction in AI. They care about momentum, and right now, momentum is leaving the building.

The cross-asset signals are flashing caution. Treasury yields are up, the VIX is elevated, and even the commodity complex is showing signs of life. The DBC ETF is stuck at $24.01, but that’s less a sign of stability than of indecision. The real tell is in the options market, where skew is starting to favor downside hedges in tech and upside bets in the defensives. This isn’t just sector rotation, it’s a regime shift.

Strykr Watch

Technically, XLK is stuck in a rut. The $141.06 level is both a psychological and technical pivot, with the 50-day moving average just below at $139.50. A break below that opens the door to $135, where the next band of institutional support sits. On the upside, $145 is the line in the sand for any meaningful reversal. RSI is hovering near 48, suggesting neither oversold nor overbought conditions, but the momentum indicators are rolling over. Utilities ETFs, by contrast, are pushing toward multi-month highs, with relative strength against tech at its strongest since late 2022.

The options market is pricing in a volatility event around Friday’s CPI, with implied vol in XLK up 12% week-on-week. Put-call ratios are ticking higher, and the open interest in downside strikes is the highest since last summer’s correction. For traders, this is a market that rewards nimble positioning and punishes complacency.

The risk, of course, is that the rotation turns into liquidation. If the S&P 500 loses key support at 4,800, the CTAs could trigger a cascade of systematic selling. That’s not a prediction, but it’s a scenario that’s on every desk right now. The utilities sector, meanwhile, is not without its own risks, Benzinga flags three names that could implode this quarter if momentum stalls. But for now, the flows are clear: money is moving out of tech and into safety.

The opportunity here is to play the rotation, not fight it. Long utilities and industrials against tech has been the trade of the quarter, and there’s no sign of that changing unless Friday’s CPI comes in much softer than expected. For the brave, selling out-of-the-money calls on XLK or buying puts into the event could pay off. For the patient, waiting for a tech washout before reloading might be the move.

Strykr Take

The tech trade isn’t dead, but it’s definitely on life support. The rotation into defensives is real, and it’s being driven by more than just fear. It’s about positioning, flows, and the recognition that the easy money in tech is gone for now. Strykr Pulse 58/100. Threat Level 3/5. This is a market that rewards discipline and punishes the crowd. Don’t fight the tape. Trade the rotation.