Former Tigers Charles Wright and Kasper Andersen came back to haunt their old team-mates with paid 22 points between them which swung the match in their favour.
Stead was clearly gutted after the loss and admitted: “It’s obviously very disappointing to lose at home. But fair play to Redcar they came here and rode brilliantly.
“We know where the problems are and they were exploited today. It’s frustrating for all of us but we have to move on and get a reaction from the boys.
“We now know we need to get wins away from home. We’ve got Eastbourne here next Sunday at Owlerton and we have to put this right.
“It’s easy to see what the problems are for us. We only won four races all afternoon and we suffered for that.
“Sport is a funny thing, old riders have a habit of coming back to get you and Charles and Kasper were obviously going to be fired-up and they did a job on us.
“It’s hard for us because we are struggling to cover with rider replacement for Broc Nicol and we don’t know how long he’ll be out injured. We will know more about the extent of his injuries later this week.
“Drew Kemp is also having a huge amount of machinery problems which isn’t helping his confidence. But we’ll put an arm round him and try and get his morale back up as soon as possible.
“All we can do now if forget this one and move on. Redcar are clearly now a top side since they made their changes. They knocked Glasgow out of the KO Cup on Friday and have now won here.
“It’s hard to take but we’ll bounce back. I know the boys can do that.”
Redcar had swooped to bring in Erik Riss, Kasper Andersen and Tom Woolley last Wednesday and were immediately a threat in the early stages.
But a maximum 5-1 from Jordan Stewart and Michael Palm Toft, both passing Danny King, in Heat 10 really put the home side in trouble.
The last laugh went to former Tiger Wright, winning both Heats 13 and 15, to complete his maximum and give Redcar an impressive win.
Sheffield 42: Danny King 11+1, Kyle Howarth 9, Zaine Kennedy 8+3, Ty Proctor 7+1, Josh MacDonald 7+1, Drew Kemp 0.
Redcar 48: Charles Wright 15, Erik Riss 9, Michael Palm Toft 7+1, Kasper Andersen 6+1, Jordan Stewart 6, Nathan Greaves 4, Tom Woolley 1.