The S&P 500 and Nasdaq Composite closed near record highs last Friday, driven by a cogent AI spending narrative and solid macroeconomic fundamentals. However, the prospect of cheap AI from Chinese company DeepSeek’s model caught investors off guard, leading to a sharp decline on Monday.
Despite this initial downturn, the market rebounded almost exactly to its level from last Friday, erasing nearly all of DeepSeek’s impact. The mood shifted again when President Trump announced no tariff reprieve, and the S&P 500 and Nasdaq quickly gave up their gains.
Wall Street strategists warn that the market remains sensitive due to its high-tech concentration and exposure to headline risk. However, the earnings story continues to drive stocks long-term, providing a stabilizing force for the cycle of volatility.
Market analyst Brian Belski notes that headline risk is unlikely to disappear anytime soon, creating “a bumpy ride” for US stocks. Despite this, sanguine outlooks and a strong earnings story suggest the market’s healing force is still at work, mitigating the impact of recent events.
Source: https://finance.yahoo.com/news/the-stock-market-is-sensitive–yet-clearly-optimistic-chart-of-the-week-105449069.html