Wall Street Daily (February 7): US stocks surged violently on Friday, panic sentiment eased significantly; Dow Jones broke through the 50,000-point mark for the first time, Russell small-cap stocks led the rally, Bitcoin staged a V-shaped reversal

US stocks rebounded strongly on Friday, with market panic sentiment receding significantly. The VIX panic index plummeted by 18.42%, falling back below the 20 mark. The S&P 500 Index surged by 1.97%, while the Nasdaq Composite skyrocketed by 2.18%. The Dow Jones Industrial Average soared by 2.47%, hitting a new all-time high above 50,000 points for the first time. The Russell 2000 small-cap index led the pack with a 3.60% gain. Investors are reassessing previous concerns related to AI, leading to a collective sharp rebound in the semiconductor sector. In terms of major asset classes, gold rebounded by 3.98% to recover earlier losses, crude oil edged up by 0.60%, remaining largely unchanged, Bitcoin staged a V-shaped reversal, surging 12.19% from its low point to reclaim levels above $70,000. The US Dollar Index dipped slightly by 0.29%.

I. Major Events

1. Treasury Secretary Bessent’s hearing triggers discussion on Fed independence

During his testimony before the Senate Banking Committee, Bessent responded to questions regarding whether the President could sue the nominee for Fed Chair, raising market concerns about the independence of monetary policy. As discussions heated up, uncertainties surrounding the interest rate path were amplified once again, making markets more sensitive to policy signals.

2. Preliminary reading of University of Michigan Consumer Sentiment rebounds

The preliminary February reading of the University of Michigan Consumer Sentiment rose to 57.3, surpassing expectations, with inflation expectations declining slightly, indicating marginal improvements in consumer confidence. The data further reinforced the market narrative of a 'soft landing' and provided emotional support for the rebound in risk assets.

3. NVIDIA CEO says AI demand is 'exploding', with chip stocks leading the rebound

NVIDIA's CEO stated that the demand for AI chips is 'exploding' and mentioned that hyperscale cloud providers are continuing to heavily invest in AI infrastructure. This statement ignited sentiment in the semiconductor sector, and tech stock sentiment subsequently recovered, becoming one of the key drivers of the index's upward movement that day.

II. Major Trends

1. Value and cyclical styles continue to lead

Over a three-month horizon, value stocks (SPYV) outperformed growth stocks (SPYG) by 5.38% versus -0.25%, and industrials (DIA) beat technology stocks (QQQ) by 4.25% versus -0.34%. Cyclical stocks led gains today, further reinforcing this trend — Caterpillar surged over 6%, GE Aerospace climbed more than 5%, airline stocks soared collectively between 7%-9%, and the industrial sector (XLI) closed up 2.86%.

2. Small-cap stocks outperform but face short-term pullback

The Russell 2000 small-cap index gained 6.83% over three months, significantly outpacing the S&P 500’s 2.26%, reflecting capital flowing from large-cap giants to broader markets. However, on a two-week basis, IWM still fell 1.35%, indicating short-term correction pressures have not fully eased; today’s 3.60% rebound appears more like a recovery from oversold conditions.

3. Market breadth remains healthy

The equal-weight RSP rose 6.37% over three months, surpassing the market-cap weighted SPY’s 2.26%, showing a diversified uptrend. Today’s recovery also reflected broader participation rather than relying solely on a few heavyweights to 'pull the index.'

III. Market Sentiment

Market panic receded sharply on Friday. The VIX fear index plummeted 18.42% to 17.76, dropping below the 20 threshold, quickly cooling off the prior day’s 17% spike in tension. The CNN Fear & Greed Index rebounded from 34 to 45, jumping 11 points in a single day, moving from the “extreme fear” range back to the lower end of “fear,” though it remains distant from the neutral level (50), indicating sentiment repair is incomplete. In terms of market breadth, the ratio of advancing to declining stocks exceeded 3:1, with the Russell 2000 leading major indices with a 3.60% gain. The options market cooled simultaneously, as the CBOE equity Put/Call ratio retreated to 0.66, below the 0.7 optimistic threshold, signaling a rapid retreat of bearish sentiment. Overall, the market is emerging from three consecutive days of panic selling but remains in the early stages of recovery.

IV. Market Scan

1. Index ETFs

All four major index ETFs surged, with IWM leading at a 3.59% gain, amplifying its high-beta characteristics amid improving risk appetite. DIA followed closely with a 2.48% increase, driven by the milestone effect of the Dow breaking through 50,000 for the first time and leadership from cyclical stocks. QQQ rose 2.11%, powered mainly by a strong rebound in the semiconductor sector. SPY climbed 1.92%, relatively moderate, reflecting the smaller elasticity of large-cap stocks during rotational rallies. Small-cap leadership also extended their three-month outperformance trend over larger indices.

2. Industry Sectors

The technology sector (XLK) soared with a 4.06% increase, leading a strong rebound across semiconductors — NVIDIA surged 7.87%, Broadcom jumped 7.1%, and AMD rose 8%. Amazon's substantial AI capital expenditure guidance further reassured the market of the enduring demand for computing power. The industrial sector (XLI) climbed 2.86%, with Caterpillar, GE Aerospace, and airline stocks (United Airlines up 9.3%, Delta up 8%) showing collective strength. Materials (XLB) increased by 2.00%, energy (XLE) by 1.99%, healthcare (XLV) by 1.85%, real estate (XLRE) by 1.84%, financials (XLF) by 1.82%, and consumer staples (XLP) by 1.17%, presenting a broad-based rally. The only decliner was the communication services sector (XLC), which fell 0.39%, dragged down by Google.

3. Seven Major Tech Stocks

NVIDIA (NVDA) led the gainers with a 7.87% rise, recovering first to its 'upward trajectory' after consecutive days of correction. Tesla (TSLA) followed the broader market rebound with a 3.50% increase. Google (GOOG) was the only member of the Magnificent Seven to decline, closing down 2.48%, as the market continued to digest its AI capital expenditure expectations, and concerns over free cash flow continued to weigh on its stock performance.

4. Chinese概念股

Chinese tech stocks performed strongly overall, led by Baidu (BIDU) with a 5.02% gain, followed by Bilibili (BILI) up 4.40%, PDD Holdings (PDD) rising 3.65%, and Alibaba (BABA) climbing 3.01%. The China-focused ETF (KWEB) increased by 2.82%. The sector benefited from a global recovery in risk appetite, while ongoing enthusiasm around China’s tech-related narratives also supported sentiment. JD.com (JD) rose 2.75%, Tencent Music (TME) gained 2.57%, NetEase (NTES) climbed 2.18%, and Futu (FUTU) added 1.02%.

5. Cryptocurrencies and related stocks

Bitcoin staged a dramatic V-shaped reversal, surging from a recent intraday low of around $60,000 to $71,458, with the latest quotes back above $70,000. After more than $2.8 billion worth of leveraged long positions were liquidated, short covering drove the price recovery. MicroStrategy (MSTR) soared 26.11%, leading gains on the Nasdaq, as its Q4 earnings reaffirmed its 'diamond hands' strategy of holding over 710,000 BTC, triggering massive short covering. Palantir (PLTR) rose 4.53%, bouncing back after several days of declines.