U.S. stocks are extremely fragile! From SaaS and PE to insurance, property management, and even logistics experiencing “big drops one after another,” Goldman Sachs traders are “exhausted and shocked.”

U.S. stocks are extremely fragile! From SaaS and PE to insurance, property management, and even logistics experiencing “big drops one after another,” Goldman Sachs traders are “exhausted and shocked.”

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The US stock market is experiencing a rare, comprehensive panic sell-off, with expectations of AI disruption hitting various industry sectors like dominoes.

Goldman Sachs trader Ryan Shakey describes the current market as "extremely fragile"; more than 40 S&P components experienced abnormal swings exceeding three times the standard deviation on Friday, marking the highest level in his memory. This volatility far surpasses the previous trading day's 15 affected stocks.

The market shows a clear defensive tendency: utilities, consumer staples, REITs, and healthcare sectors are leading gains, while technology, media, and telecom sectors are suffering sharp declines. The Goldman Sachs AI risk exposure basket (GSTMTAIR) saw another three-standard-deviation plunge, dropping 510 basis points in a single day.

The latest trigger for market panic is comments from Microsoft's head of AI business. It is reported that the executive stated most white-collar jobs will be replaced by AI within 12 months, saying "AI models' programming abilities have surpassed humans." This statement prompted investors to re-evaluate the range and speed of AI disruption.

What shocked traders most is that investors have generally lost their willingness to buy the dip. Goldman Sachs' trading desk observed that although hedge funds and long-only institutions are selling, the scale is small, indicating "fatigue is accumulating." Limited buying is only concentrated in industrials, consumer staples, utilities, REITs, and energy—cyclical and defensive sectors.

Market Breadth Deteriorates Rapidly

Market breadth is deteriorating, with 350 S&P 500 components falling on Friday, and Apple, Amazon, Microsoft, Meta, and Cisco dragging the index down the most. Goldman Sachs trading desk activity jumped sharply from 4/10 in the morning to a high level, with inquiries reaching the highest in two weeks.

Factor rotation is exhibiting extreme characteristics. Defensive sectors have become a safe haven, while previously strong tech stocks have collapsed across the board. Traders note the most prominent market feature is that investors are "completely unwilling to buy any AI-related sharp drops," a phenomenon spanning all industry sectors.

Logistics Hit Hard, Financials and Healthcare Also Under Pressure, Tech Collapses Completely

Transport stocks in the industrial sector were the focus on Friday. Logistics company CH Robinson saw its share price plunge eight times the standard deviation, highlighting that AI panic is spreading from the tech sector to traditional industries.

According to Goldman Sachs industrial sector trader Novak, AI has swept through various sectors over the past week or two, searching for potential "losers." The sell-off of CH Robinson reflects a 180-degree shift in investor attitude—the company was previously seen as an AI beneficiary. The debate centers around whether using chatbots to match freight can improve efficiency and reduce labor costs, but may also lead to business commoditization.

Alternative asset managers jumped at the open but turned lower, and bank stocks began to wobble. Goldman Sachs financial sector trader Degrasse points out that super regional banks were previously considered “attractive safe havens” in the financial sector, but that logic is collapsing.

Defensive REITs continue to climb, but commercial real estate services company CBRE’s strong earnings failed to lift its share price. Traders say, “Clearly, earnings don’t matter in the current market environment,” though longs insist that will eventually matter.

Healthcare sector contract research organizations (CROs) have plunged 32% so far this month, after Pfizer announced it would use AI for most of its clinical trials. ICLR dropped 38% in a single day on Friday, further impacting this niche.

Tech, media, and telecom stocks, except for storage chips, fell across the board. Software, internet, and the newly joined media sector all came under pressure on Friday. Goldman Sachs TMT traders note that previously "winner" stocks are being sold off amid risk aversion.

The market is reassessing companies previously seen as AI winners, with valuation factors coming into play. Investors are puzzled, wondering “what is wrong with these earnings,” but in the current panic, fundamental analysis seems to have been cast aside.

Risk Warning and DisclaimerThe market has risks; invest cautiously. This article does not constitute personal investment advice nor does it consider the special investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article suit their specific circumstances. If you invest accordingly, you are solely responsible. ```