Is the $1 trillion rebound a "dead cat bounce"? Hidden worries behind the rise of US stocks, market confidence is weak

Experts say they have limited confidence in whether the US stock market can continue the rebound of $1 trillion after last week's artificial intelligence-induced crash. Friday's strong rebound - the S&P 500 index recorded its best single-day performance since May last year - erased most of the losses from last week. However, investors are still struggling to price the uncertain economic outlook in the US, and are increasingly concerned about how artificial intelligence will reshape industries, especially the software industry at the center of this turmoil. Behind Friday's strong performance lies signs of the market's lack of confidence in this wave of trading. The expected volatility of the S&P 500 index is higher than the average level this year, indicating that market anxiety still exists. The trading volume also confirms the lack of enthusiasm in the market, with turnover about 13% lower than the five-day average. Goldman Sachs Group, Inc.'s short position portfolio rose by about 9%, marking its best single-day performance since April, indicating that some of the rebound may be due to traders closing positions in higher-risk stocks. Sameer Samana, global stock and physical asset manager at Wells Fargo & Company Investment Research Institute, said: "The theme of artificial intelligence has shifted from benefiting all stocks to winner-takes-all. Before the market can distinguish between winners and losers, it will be difficult to determine the leader and create new highs." It is worth noting that last week's decline was not entirely related to artificial intelligence. Weak US labor market data also raised concerns about the economic outlook, exacerbating downward pressure on the stock market, commodities, and cryptocurrencies. Admittedly, a report released last Friday showed that the US consumer confidence index reached its highest point in six months, supporting a sharp rise in the stock market that day. However, all of this has made the market more focused on the US monthly non-farm employment data, which was delayed and will be released on Wednesday, to assess the extent of the economic rift. Trading in the field of artificial intelligence still remains worrying. Investors have been concerned about whether large tech companies can monetize their significant investments in artificial intelligence technology. Now, with the launch of new tools for legal work and financial research by the startup company Anthropic, the threat posed by artificial intelligence to many business models is also causing them to worry. The financial reports of the "Tech Seven Giants" members Microsoft Corporation (MSFT.US), Alphabet Inc. Class C parent company Alphabet (GOOGL.US), and Amazon.com, Inc. (AMZN.US) have all exceeded expectations, leading to declines. Amazon.com, Inc.'s stock price fell by nearly 6% last Friday, marking its largest decline since August, after the company announced plans to spend $200 billion this year on data centers, chips, and other equipment. These declines have put pressure on market valuations. Data shows that the current price-to-earnings ratio of the S&P 500 index is about 22 times (based on expected profits for the next 12 months), close to the lowest level since April last year when President Trump introduced comprehensive tariff policies and caused market turmoil. However, this has not yet aroused the buying desire of Wall Street professionals. Goldman Sachs Group, Inc.'s trading department stated in a report to clients on Friday that its tracked positions and sentiment indicators indicate that the market may continue to decline. The company's models show that regardless of market direction, systematic and rules-based funds will continue to sell this week. Adam Turnquist, chief technical strategist at LPL Financial, is closely monitoring whether the S&P 500 index can hold above its December low. Turnquist said this will determine the market trend for the remainder of 2026. According to Turnquist, since 1950, when the S&P 500 index maintains above the December low in the first quarter, the index's average annual return rate is 19.5%. Conversely, when the benchmark index falls below this threshold, the average annual return rate drops to 0.6%. At its weakest point this month, the index's closing price was about 1% higher than the December closing low. The intense volatility in the US stock market in recent weeks has mainly been characterized by a rotation of funds from tech stocks to sectors related to economic growth, such as energy and materials. However, weak US employment data has shifted people's concerns away from the field of artificial intelligence. Keith Lerner, chief investment officer at Truist Advisory Services, said: "These actions make people say, 'Let me be more cautious than before', and wait for better opportunities."