Wall Street Shows Its 'bouncebackability': McGeever

By Jamie McGeever

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

This Britishism is usually connected with cliche-prone soccer supervisors trumpeting their groups' capability to react to beat. It's not likely to discover its way across the pond into the Wall Street crowd's lexicon, however it completely summarizes the U.S. stock market's strength to all the problems, shocks and accc.rcec.sinica.edu.tw everything else that's been tossed at it recently.

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

Any among those problems still has the possible to snowball, triggering an avalanche of offering that could press U.S. equities into a correction or even bear-market territory.

But Wall Street has actually become incredibly resilient given that the 2022 thrashing, specifically in the last 6 months.

Just look at the artificial intelligence-fueled turmoil on Jan. 27, stimulated by Chinese start-up DeepSeek's discovery that it had established a large language design that might attain similar or better results than U.S.-developed LLMs at a portion of the cost. By lots of steps, the market move was seismic.

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

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

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

U.S. equity funds brought in nearly $24 billion of inflows recently, innovation fund inflows struck a 16-week high, and momentum funds attracted positive flows for a fifth-consecutive week, according to EPFR, the fund flows tracking company.

"Investors saw the DeepSeek-triggered selloff as an opportunity rather than an off-ramp," EPFR director of research Cameron Brandt wrote on Monday. "Fund flows ... recommend that much of those financiers kept faith with their previous assumptions about AI."

PANIC MODE?

Remember "yenmageddon," the yen carry trade volatility of last August? The yen's abrupt bounce from a 33-year low against the dollar stimulated worries that investors would be required to sell assets in other markets and nations to cover losses in their huge yen-funded bring trades.

The yen's rally was severe, on par with previous monetary crises, and the Nikkei's 12% fall on Aug. 5 was the biggest one-day drop because October 1987 and the second-largest on record.

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

So Wall Street has actually passed 2 huge tests in the last six months, a period that included the U.S. governmental election and Trump's return to the White House.

What explains the strength? There's no one apparent answer. Investors are broadly bullish about Trump's economic agenda, the Fed still appears to be in alleviating mode (for now), the AI craze and U.S. exceptionalism stories are still in play, and liquidity is numerous.

Perhaps one key driver is a well-worn one: the Fed put. Investors - a lot of whom have invested a good piece of their working lives in the era of extremely loose monetary policy - may still feel that, if it really comes down to it, the Fed will have their backs.

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