NEW YORK (TheStreet) -- Stocks paused for breath after two days of record highs, perhaps reflecting on a lackluster earnings season and the absence of fundamentals to move higher.

As the rally grows long in the tooth, it looks increasing complex. Only 10% of S&P names hit new 52-week highs on the most recent breakout to record territory -- making the air more than a little thin at the top of the mountain. While last year's rally was fairly broad-based, the market now shows a sharp split away from momentum stocks in technology and financials toward utilities, health care and consumer staples. 

Federated Investors chief equity strategist Phil Orlando describes this as a "violent defensive rotation," and one that he expects to continue.

This earnings season has also seen a slowdown in revenue growth, with many investors awaiting confirmation of a sustainable economic recovery. Everyone expects a bounce in second-quarter GDP after our Q1 shocker, the question is, how long will that last? 

Orlando argues a mild correction of around 5% is likely before healthy U.S. economic growth is confirmed and markets push higher late this year. "Until then, we'll be on tenterhooks," he adds.

Risk-off mode was also evident in small-cap land, with the Russell 2000 down around 0.90% in afternoon trade after shedding more than 1% on Tuesday. So much for Monday's bounce: it's one step forward and two steps back for smaller, riskier stock plays. 

Meanwhile, global bond yields signal expectations that accommodative monetary policy is baked in for sometime. And don't be surprised if we're back in the green tomorrow, with a raft of economic data due. Fed Chair Janet Yellen is slated to speak to the U.S. Chamber of Commerce and U.S. Small Business Administration as part of National Small Business Week. She is likely to soothe investors by indicating policy will remain loose as the world's largest economy shakes off a brutal winter and shows its strength (we hope) in spring.

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-- By Jane Searle in New York

Follow @itsjanesearle