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On the one hand, what a month. But on the other, what a week.
Last Friday, the S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) closed just off record highs, with the former above its 6,100 mark after surpassing it for the first time. A cogent AI spending narrative, solid macroeconomic picture, and Trump deregulation promises had the portfolios looking good — with little need to check the financial news over the weekend.
We all know what happened. The prospect of cheap AI caught investors off guard as Chinese company DeepSeek’s model showed an impressive product that was purportedly much cheaper, casting a shadow over the AI spending engine — which has also been powering Nvidia (NVDA) and the chip sector. The Nasdaq fell 3% at Monday’s open, and the S&P 500 fell half that.
But as our Chart of the Week shows, the market returned — almost exactly — to where it was last Friday. If you took the week off, you might log back on to our website and wonder why everyone seems so on edge. A week of the waves eroded nearly all of DeepSeek’s footprints on the major indexes.
Of course, the mood shifted again. President Trump signaled there would be no tariff reprieve, and the S&P 500 and Nasdaq quickly gave up their gains. Here’s Friday:
The point here is that if this were a writer’s room, all the things going on would have the suits coming back with the same note: This is unrealistic, dial it back.
Foundation-shaking AI news. Tariff uncertainty. A federal funding flash freeze — and thaw. A politically tense Fed meeting. And, of course, one of the worst aviation disasters in decades.
These are huge, front-page events, even if not all of them are moving markets. But there’s a feeling among Wall Street strategists that this is a market particularly prone to sensitivity, feeling the exposure in its tech concentration or heights.
The “tech stock rout was a reminder that there remains a decent amount of headline risk, especially considering that the expectation bar is much higher this year compared to the previous two years,” BMO’s Brian Belski wrote in a note to clients this week. “And specifically for AI-driven investment themes,” he added.
Clearly. And yet, the market is forgetting quickly — or at least moving on. The market may have sunk on the tariff announcement, but for both Wall Street and Main Street, there’s a desire for clarity as much as anything.
