These Stocks Drove the Market’s Losses in Q1 2026

Key Takeaways

• Technology, communication services, financial, and consumer cyclical stocks weighed down the market in the first quarter.
• AI giants Microsoft and Nvidia were the largest individual drags.
• Energy stocks soared but had a limited impact on overall market performance, due to their smaller index weights.

Amid first‑quarter uncertainty driven by the Iran war, the unclear future of software stocks, and growing concerns about an economic slowdown, the US stock market posted a loss in the first quarter.

Overall, the Morningstar US Market Index fell 4.2% in the first quarter, but performance diverged sharply across sectors. The Morningstar US Energy Sector Capped Index surged 38% amid soaring oil prices tied to the Iran war, while the Morningstar US Communication Services Sector Capped Index, the Morningstar US Financial Services Index, the Morningstar US Consumer Cyclical Index, and the Morningstar US Technology Index each declined by more than 8%.

By size and style, mid-cap value stocks held up best, with the Morningstar US Mid Value Index rising 5.2% in the quarter, led by Valero Energy VLO and EOG Resources EOG. In contrast, the Morningstar US Large-Cap Growth Index—whose largest holdings include Nvidia NVDA and Tesla TSLA—tumbled 12.8%.

Tech Stocks Drive Losses

Of the US Market Index’s 4.2% decline, 3.0 percentage points—roughly 70%—stemmed from the technology sector. Software stocks have been hit particularly hard in recent months, as concerns that artificial intelligence could disrupt traditional business models have weighed on sentiment. Mounting macroeconomic uncertainty tied to the Iran war and rising oil prices has further intensified the selloff.

Microsoft MSFT, which has a market capitalization of $2.7 trillion and a 4.9% weight in the index, accounted for 1.3 percentage points of the loss—over 30% of the index’s total decline and more than double Nvidia’s 0.5-point drag. Microsoft tumbled 23.3% in the quarter—its worst quarterly performance since the fourth quarter of 2008—while Nvidia fell 6.5%.

Other notable detractors in the tech sector include Apple AAPL, which dropped 6.6% in the quarter and shaved 0.4 percentage points off market returns, and Broadcom AVGO, which fell 10.4% and detracted 0.3 points.

Outside of technology, financial services had the largest drag on performance at the sector level, detracting 1.2 percentage points, followed by consumer cyclical, which detracted 1.0 points, and communication services, which shaved 0.9 points off returns.

Within financial services, Visa V dropped 13.6% in the quarter, trimming 0.1 percentage points from market returns, while JPMorgan JPM fell 8.3% in the quarter, also detracting 0.1 points. From the consumer cyclical sector, Amazon AMZN declined 9.8%, weighing on returns by 0.3 points, and Tesla TSLA fell 17.3%, also subtracting 0.3 points.

In communication services, the two Alphabet GOOGL/GOOG share classes together detracted 0.4 percentage points, with each down more than 8% for the quarter. Meta Platforms META tumbled 13.3%, shaving an additional 0.3 points off returns.

Energy Stocks Soar, but Market Impact is Muted

Energy stocks were the top contributors to market performance in the first quarter, with Exxon Mobil XOM and ConocoPhillips COP each surging more than 40%. Exxon’s 43% gain marks its strongest quarterly performance on record, going back to 1972, while ConocoPhillips’ 43% jump is its best since 1975.

Their overall impact on the market was limited, however, given the sector’s modest 3.4% weight in the US Market Index. In total, energy added 1.1 percentage points to the index’s performance. Exxon added 0.3 points, Chevron CVX added 0.2 points, and ConocoPhillips added 0.1 points.