S&P 500’s $1 Trillion Rebound Offers Wall Street Little Solace

(Bloomberg) — Stock pros are signaling limited conviction in the US equity market’s ability to build on its $1 trillion rebound from last week’s artificial intelligence-driven rout.

Friday’s sharp recovery — the S&P 500 Index had its best day since May — wiped out most of the week’s losses. However, investors are still wrestling with a murky economic outlook and growing concern about how AI will reshape various industries, in particular the software sector that was at the center of the week’s tumult.

Most Read from Bloomberg

Beneath the surface of Friday’s strength, there were hints that confidence in the move was thin. A measure of expected volatility in the S&P 500 is above its average this year, suggesting a lingering sense of unease. Trading volume also pointed to a lack of exuberance, clocking in around 13% below the five-day average. A roughly 9% rally in a Goldman Sachs Group Inc. basket of most-shorted names, its best day since April, indicated that some of the recovery came from traders exiting bets against riskier shares.

“The AI theme has changed from one where it will lift all boats to becoming more winner-take-all,” said Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute. “Until the market is able to separate the winners from the losers, it will have difficulty figuring out leadership and making new highs.”

Also of note, last week’s losses weren’t all about AI.

Weak US labor-market data raised worries around the economic backdrop, helping deepen the pressure on stocks, commodities and cryptocurrencies. To be sure, a report Friday showed consumer sentiment rose to a six-month high, which helped support the day’s big advance. But it’s all boosting the focus on Wednesday’s delayed release of monthly US employment figures to assess the extent of the emerging cracks.

AI Angst

The AI trade remains a deep concern. Investors have been fretting about whether megacap tech companies can monetize their immense spending on the technology. Now they’re grappling with the competitive threat it poses to a large swath of business models after startup Anthropic rolled out new tools for legal work and financial research.

Earnings from Magnificent Seven members Microsoft Corp., Google-parent Alphabet Inc. and Amazon.com Inc. showed bigger outlays than anticipated, sending their shares tumbling. Amazon on Friday fell almost 6%, the most since August, after it announced plans to spend $200 billion this year on data centers, chips and other equipment.

The declines blew some froth out of the market. The S&P 500 is trading at about 22 times expected 12-month profits, around the lowest level since President Donald Trump’s rollout of sweeping tariffs in April roiled markets, data compiled by Bloomberg show. But it’s not tempting Wall Street pros just yet.

Goldman Sachs’ trading desk on Friday said in a note to clients that positioning indicators it tracks suggests further scope for volatility. The firm’s models signal that Commodity Trading Advisors, or CTAs, are set to keep selling this week regardless of the market’s direction. And the bank’s prime brokerage team said notional short selling across US single stocks last week was the biggest on record in its data going back to 2016.

Futures on the S&P 500 Index were down 0.2% at 7:38 a.m. in New York.

Read: Goldman Traders Say ‘Buckle Up’ for Choppy Stocks as Algos Sell

At LPL Financial, Adam Turnquist is watching whether the S&P 500 is able to stay above its December low. The firm’s chief technical strategist says that will dictate what the rest of 2026 looks like.

Since 1950, when the S&P 500 has held above its December nadir in the first quarter, the index has produced an average annual return of 19.5%, according to Turnquist. In contrast, when the benchmark has broken below that threshold, average annual returns drop to 0.6%.

At its weakest point this month, the gauge finished about 1% above its December closing low.

Much of the turbulence in US equities in recent weeks has been marked by a rotation out of technology into pockets of the market tied to economic growth, like energy and materials. But soft employment data have shifted concerns beyond just AI.

“These moves also make people say, ‘Let me be a little bit more cautious than I had been” and wait for a better opportunity,” said Keith Lerner, chief investment officer at Truist Advisory Services.

(Updates with new data in 10th paragraph, futures trading in 11th paragraph.)

Most Read from Bloomberg Businessweek

©2026 Bloomberg L.P.