Wall Street Shows Its bouncebackability : McGeever

By Jamie McGeever


ORLANDO, Florida, Feb 5 (Reuters) - "Bouncebackability."


This is typically connected with cliche-prone soccer managers trumpeting their teams' capability to react to beat. It's unlikely to discover its method throughout the pond into the Wall Street crowd's lexicon, however it perfectly summarizes the U.S. stock exchange's strength to all the setbacks, shocks and whatever else that's been thrown at it just recently.


And there have been a lot: U.S. President Donald Trump's tariff flip-flops, stretched appraisals, extreme concentration in Big Tech and the DeepSeek-led chaos that just recently cast doubt on America's "exceptionalism" in the worldwide AI arms race.


Any one of those concerns still has the possible to snowball, triggering an avalanche of selling that could press U.S. equities into a correction and speedrunwiki.com even bear-market territory.


But Wall Street has actually become remarkably resilient since the 2022 thrashing, specifically in the last 6 months.


Just look at the artificial intelligence-fueled chaos on Jan. 27, spurred by Chinese start-up DeepSeek's revelation that it had actually developed a big language model that might attain comparable or much better outcomes than U.S.-developed LLMs at a portion of the expense. By numerous procedures, the market relocation was seismic.


Nvidia shares fell 17%, slicing nearly $600 billion off the company's market cap, the greatest one-day loss for any company ever. The value of the larger U.S. stock market fell by around $1 trillion.


Drilling deeper, experts at JPMorgan discovered that the thrashing in "long momentum" - basically purchasing stocks that have been carrying out well recently, such as tech and AI shares - was a near "7 sigma" relocation, or seven times the basic deviation. It was the third-largest fall in 40 years for this trading technique.


But this epic move didn't crash the marketplace. Rotation into other sectors accelerated, and around 70% of S&P 500-listed stocks ended the day higher, meaning the broader index fell only 1.45%. And buyers of tech stocks quickly returned.


U.S. equity funds attracted almost $24 billion of inflows recently, technology fund inflows hit a 16-week high, and momentum funds attracted positive flows for a fifth-consecutive week, according to EPFR, the fund streams tracking company.


"Investors saw the DeepSeek-triggered selloff as an opportunity instead of an off-ramp," EPFR director of research study Cameron Brandt composed on Monday. "Fund streams ... suggest that much of those financiers kept faith with their previous presumptions about AI."


PANIC MODE?


Remember "yenmageddon," the yen carry trade volatility of last August? The yen's sudden bounce from a 33-year low against the dollar triggered fears that financiers would be forced to sell possessions in other markets and countries to cover losses in their big yen-funded bring trades.


The yen's rally was extreme, on par with past monetary crises, and the Nikkei's 12% fall on Aug. 5 was the greatest one-day drop given that October 1987 and the second-largest on record.


The panic, if it can be called that, spread. The S&P 500 lost 8% in 2 days. But it disappeared rapidly. The S&P 500 recouped its losses within two weeks, and the Nikkei did similarly within a month.


So Wall Street has actually passed 2 huge tests in the last six months, a period that consisted of the U.S. presidential election and Trump's go back to the White House.


What explains the resilience? There's nobody obvious response. Investors are broadly bullish about Trump's financial program, the Fed still seems to be in easing mode (for now), the AI craze and wavedream.wiki U.S. exceptionalism stories are still in play, and liquidity abounds.


Perhaps one crucial driver is a well-worn one: the Fed put. Investors - a number of whom have spent a good portion of their working lives in the age of extremely loose financial policy - might still feel that, if it really comes down to it, the Fed will have their backs.


There will be more pullbacks, and dangers of a more prolonged slump do appear to be growing. But for now, the rebounds keep coming. That's bouncebackability.


(The opinions revealed here are those of the author, a writer for Reuters.)


(By Jamie McGeever; Editing by Rod Nickel)