None of the layers should look like your screenshot. Something is not working correctly. I have never seen anything like this happen.
It could be a corrupted Photoshop preferences file.
Please reset the Photoshop preferences. In the Photoshop preferences under the General section, select Reset Preferences on Quit. Then restart Photoshop and try again. Let me know if the issue still happens after resetting the preferences and restarting Photoshop.