Fear? Greed? Hardly! The market is experiencing true schizophrenia. Not long ago, traders believed the artificial intelligence revolution would accelerate the economy and boost corporate profits. Now, there are fears that AI technologies are so revolutionary that they will cause many companies to disappear. Investors are trying to figure out who will suffer first and are dumping shares of software makers, brokers, and other financial services providers.

Banks have been caught in the crossfire. Shares of Bank of America, JP Morgan, and Citigroup fell by more than 2%, sending the S&P 500 on a rollercoaster ride. The rally in the broad equity index was driven by impressive US labor market statistics. In December, the economy added 130,000 jobs, and the unemployment rate unexpectedly fell from 4.4% to 4.3%.

Dynamics of US stock indices

However, the decline in the probability of easing Fed policy in April from 42% to 22% and the rise in Treasury yields have forced investors to change their views. Much of the bad news from the US economy was good for the S&P 500 in 2025. However, the situation has been turned on its head in 2026. Even positive US economic news is becoming bad for the US equity market. Timetables for the resumption of the Fed's monetary expansion cycle are moving later, which makes the broad index nervous.

This is not to say the situation is critical. On the contrary, it opens the door to broader rotation. According to Deutsche Bank, industry equity funds outside the tech group attracted a record $62 billion in the first five weeks of this year. That is more than all of 2025. People are not scared at all. Conversely, a Federal Reserve Bank of New York survey shows Americans' optimism about equities is at its highest since last year's peak.

Nevertheless, the rotation is producing wide swings. Citigroup notes that many companies register huge moves when their actual corporate results materially differ from forecasts — declines or gains averaging 5.2%, the highest reading since 2012.

P/E dynamics for software makers

The question is whether to keep ditching tech. JP Morgan and Goldman Sachs believe it is time to buy the markedly cheaper names. The forward price-to-earnings ratio for software makers fell to a record low, below 20. It has recovered slightly to 23, but remains well below the average of 34.

Technically, the daily chart shows that the S&P 500 is exhibiting mixed movements with a double top pattern. In this situation, it makes sense to watch fair value at 6,840. The bulls' inability to cling to it would be a trigger for selling — and vice versa.