As the software sector takes a hit, investors are witnessing a familiar tale of rotation playing out in the US stock market. Despite the index’s slight pullback, the S&P 500 remains resilient, thanks to gains in energy, materials, and staples. However, this rotation masks the underlying damage in the tech sector, which is poised to drag the index down further.

History rhymes as we see parallels between today’s market dynamics and the early 2000s. Just like then, the tech sector is weakening while defensives and cyclicals pick up the slack. But unlike in 2000, when the tech slide ultimately dragged the S&P 500 over 10% lower, this time around the index may be better equipped to weather the storm.

Jim Reid of DB notes that prolonged and deep losses in a dominant sector become increasingly difficult to offset. The software wreck is certainly causing ripples throughout the market, but the question remains: will gravity ultimately win out? Only time will tell.

In the meantime, investors would do well to keep a close eye on the tech sector and its impact on the broader market. As rotation continues to drive performance, it’s important to stay nimble and adapt to changing market conditions. While the software wreck may be a cause for concern, it’s also a reminder that the market is dynamic and always evolving.