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1 Wall Street Shows Its 'bouncebackability': McGeever

By Jamie McGeever

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

This Britishism is usually associated with cliche-prone soccer supervisors trumpeting their teams' capability to respond to defeat. It's unlikely to discover its method across the pond into the Wall Street crowd's lexicon, bytes-the-dust.com however it completely sums up the U.S. stock market's strength to all the problems, shocks and whatever else that's been thrown at it just recently.

And there have actually been a lot: bybio.co U.S. President Donald Trump's tariff flip-flops, extended appraisals, extreme concentration in Big Tech and the DeepSeek-led turmoil that recently called into question America's "exceptionalism" in the international AI arms race.

Any one of those concerns still has the prospective to snowball, causing an avalanche of offering that could press U.S. equities into a correction or perhaps bear-market area.

But Wall Street has become incredibly resilient because the 2022 thrashing, particularly in the last six months.

Just look at the artificial intelligence-fueled chaos on Jan. 27, spurred by Chinese startup DeepSeek's discovery that it had actually developed a big language model that might attain similar or much better results than U.S.-developed LLMs at a fraction of the cost. By numerous procedures, the market move 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 worth of the .S. stock exchange fell by around $1 trillion.

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

But this impressive move didn't crash the marketplace. Rotation into other sectors sped up, and almanacar.com around 70% of S&P 500-listed stocks ended the day greater, meaning the wider index fell only 1.45%. And purchasers of tech stocks soon returned.

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

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

PANIC MODE?

Remember "yenmageddon," the yen bring trade volatility of last August? The yen's unexpected bounce from a 33-year low against the dollar triggered fears that investors would be forced to offer properties in other markets and nations to cover losses in their big yen-funded bring trades.

The yen's rally was extreme, wiki.rrtn.org on par with previous monetary crises, and the Nikkei's 12% fall on Aug. 5 was the most significant one-day drop considering 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 two days. But it vanished quickly. The S&P 500 recovered its losses within 2 weeks, and the Nikkei did likewise within a month.

So Wall Street has actually passed two big tests in the last six months, a period that consisted of the U.S. presidential 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 financial agenda, the Fed still appears to be in reducing mode (for now), the AI frenzy and U.S. exceptionalism stories are still in play, and liquidity abounds.

Perhaps one key driver is a well-worn one: the Fed put. Investors - a number of whom have actually invested a good portion of their working lives in the era of extraordinarily loose monetary policy - may still feel that, if it actually boils down to it, the Fed will have their backs.

There will be more pullbacks, and risks of a more extended downturn 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