AI losers are everywhere! Investors are swinging from one extreme to another to identify who will suffer from the rollout of new technologies. First came software vendors, then insurers, wealth managers, legal advisers, and even freight carriers. It is not just the S&P 500 and the Nasdaq Composite that are falling. The Dow Jones and small-cap Russell 2000 are also suffering losses.

The United States has a solid economy, a Fed poised to resume a rate-cut cycle potentially in April-June, and impressive corporate results. Yet, instead of treating the AI-linked shock as an opportunity, investors keep selling. As a result, equity indices are posting their worst weekly performance since November.

Dynamics of US Equity Indices

A slowdown in US inflation to 2.4% in January boosted the odds of the Fed easing in the second quarter. In 2025, rate-cut expectations served as a safety cushion for the equity market. Now investors view that differently — and they view Donald Trump's policy differently as well.

Political uncertainty at the start of the Republican president's second term has badly frayed market nerves. Volatility under Trump has been materially higher than under Biden. Still, belief in the so-called presidential "put" — the idea that the White House would step in to support the market — served the S&P 500 well.

US Stock Market Volatility Under Different Presidents

Now there is good and bad news. The good news is that investors have grown accustomed to shocks — to event risk, which on Wall Street denotes sudden, unexpected announcements that spark sharp moves. The bad news is that Donald Trump is not rushing to prop up the S&P 500, and event risk now relates not only to the White House but also to AI.

It is hard to reconcile why the broad equity index is falling when the US economy is standing on solid ground, and corporate earnings are strong. Company profits rose by 12% in the fourth quarter, while Wall Street analysts had expected only 8.4% before the season began. Seventy-five percent of S&P 500 companies that have reported have beaten estimates, above the long-term average.

Most likely, nobody wants to buy falling signals, as the correction in the broad equity index is not yet over. The only pleasant exception is the utilities sector, which gained 7.1% in the second week of February.

Technically, the daily S&P 500 chart indicates an ongoing pullback. A doji bar with long upper and lower shadows signals high uncertainty. A breakout of the 6,815 support level would allow traders to increase their previously established short positions on the broad index.