Markets Bounced Back Tuesday. Here's What Changed in 24 Hours.

After Monday's ugly selloff driven by tariff uncertainty and AI displacement fears, Tuesday closed with a solid recovery. The S&P 500 gained 0.77% to 6,890, the Dow added 370 points (+0.76%), and the Nasdaq rose 1.04%. The VIX, Wall Street's fear gauge, fell about 6%.

What flipped the narrative

Two things changed. First, Anthropic held an enterprise event Tuesday showing Claude Cowork will be integrating with major software platforms: Salesforce, Slack, DocuSign, FactSet, LegalZoom, Intuit, and Gmail. The message investor took away was AI may actually partner with major software companies rather than replace them. Wedbush analysts called the AI threat to software companies 'overblown.' Thomson Reuters surged 11% and Salesforce, IBM, and FactSet all recovered sharply.

Second, Meta announced a massive multiyear chip deal with AMD, signaling that AI infrastructure spending is still accelerating. AMD jumped 8.8% on the news.

What it means

Monday's selloff was a fear trade. Tuesday was a reality check. Companies in the AI ecosystem are still spending, and software companies that partner with AI may benefit rather than be destroyed by it. The real test comes today: Nvidia reports earnings after the close, and the results will either confirm or complicate this more optimistic story.

Sources: CNBC, Bloomberg, Yahoo Finance