Wall Street Daily (March 25): On Tuesday, the US stock market showed a divergence in performance with small-cap stocks leading gains while major technology stocks weakened collectively; the market has not fully let down its guard against geopolitical risks, and gold continued to strengthen.

Summary: On Tuesday, the US stock market showed divergence, with the S&P 500 Index falling 0.37%, Nasdaq dropping 0.84%, Dow Jones declining 0.18%, and Russell 2000 rising 0.45%; VIX increased to 26.95, up another 3.06% in a single day, indicating that the market remains vigilant about geopolitical risks. The main theme of the session was that expectations of easing tensions in the Middle East once lowered oil prices and boosted risk appetite, but large tech stocks weakened collectively, dragging down Nasdaq and communication services sector performance; the market did not see broad-based risk chasing. In terms of major asset classes, the US Dollar Index rose 0.10%, gold gained 1.59% continuing safe-haven buying, crude oil fell -0.54% but still saw significant intraday volatility, and Bitcoin dropped -0.65%, showing capital inflows remained relatively restrained.

I. Major Events

Expectations of easing tensions in the Middle East dominated the market, but risk premiums have not been fully cleared. The core pricing driver on Tuesday remained the market's bet on de-escalation of conflicts in the Middle East. Bloomberg reported that expectations for Washington’s diplomatic mediation efforts were rising, Brent crude plunged at one point during the day, giving risk assets some breathing space, and small-cap stocks along with broader sectors performed relatively better. However, this narrative quickly faced reality checks: Iran denied direct negotiations with the US, and oil prices rebounded near their highs. What the market traded more closely resembled 'temporary unwinding of risk premiums' rather than viewing geopolitical variables as completely resolved. As such, indexes showed weak divergence rather than a full rebound, and safe-haven funds continued to flow into gold.

II. Major Trends

From a medium-term structural perspective, the dominant characteristic of the market is not 'a return to a tech bull market,' but rather relative outperformance in breadth, value, and small-cap directions. First, the divergence among major indices remains pronounced: over a two-week period, QQQ fell 3.91% cumulatively, bearing the most short-term pressure; over a three-month horizon, IWM fell only 1.38%, continuing to significantly outperform SPY's 5.13% decline. Second, equal-weight structures remain stronger than cap-weighted structures, with RSP falling just 0.96% over three months, outperforming SPY, suggesting the market is not solely propped up by a few super-large cap stocks. Looking at style rotation, SPYV fell 1.85% over three months, significantly outperforming SPYG's 8.41% decline, and growth stocks also corrected deeper than value stocks over the past two weeks. In other words, the pullback in tech giants is not an isolated noise event, but rather a continuation of this round of style rebalancing.

III. Market Sentiment

The current sentiment does not support the conclusion of 'full recovery in risk appetite,' but rather appears to be a technical easing on the edge of panic. VIX closed at 26.95, continuing to rise for the day, indicating investors are still keeping protective positions for sudden news. The CNN Fear & Greed Index was recently at 17, slightly improved from the previous day’s 15, but remains in extreme fear territory, showing capital sentiment remains cautious. Structurally, RSP continues to outperform SPY, representing that selling pressure hasn’t concentrated across the entire market, and breadth is actually steadier than index appearances suggest. Although protective sentiment on options has eased somewhat compared to previous days, combined with high VIX levels, the market remains in a 'replenish first, then wait-and-see' state, far from aggressively repositioning.

IV. Market Scan

1. Index ETFs

The signals from index ETFs are clear: IWM rose 0.54%, becoming the relatively strongest direction of the day, indicating that capital prefers to replenish previously heavily sold small caps and domestic demand chains; QQQ fell -0.68%, exposing that large growth stocks are still digesting valuation and expectation pressures. This means the market isn't seeing universal gains but shifting temporarily from mega-cap tech stocks towards broader structures.

2. Sector Performance

At the sector level, there has been typical rotation between high and low performers. The energy sector rose 2.03%, supported partly by intraday oil price rebounds and also reflecting that capital is still unwilling to completely withdraw from geopolitical risk trades; materials rose 1.89%, indicating the market retains some hope for global growth and cyclical trends. Relatively weak was the communication services sector, which fell -1.40%, mainly dragged down by corrections in heavyweight stocks like Google, showing that as long as platform-type tech stocks are under pressure, related sectors will struggle to remain unscathed.

3. Seven tech giants

The seven major tech stocks continued to show internal divergence. Tesla rose by 0.57%, showing the most stable performance; however, Google fell by -3.28%, weighed down by concerns over its partnership with Agile Robots, which raised fears of 'high investment and slow returns,' as well as competitive pressure from Apple Maps' ad-based local search commercialization. Microsoft dropped by -2.68% as market worries grew over the expansion of its AI infrastructure and external constraints on data centers. Netflix declined by -2.63%, reflecting further compression of growth certainty premiums amid intensified competition in the streaming industry.

4. Chinese Equities

Chinese concept stocks did not uniformly weaken. PDD Holdings rose by 1.91%, indicating that investors are still willing to pay a premium for companies with stronger fundamentals and a smoother global narrative. Bilibili, however, fell by -3.38%, reflecting market concerns about user growth and the pace of subsequent performance delivery. The movement within Chinese concept stocks appears more like individual stock divergence rather than a synchronized recovery in overall risk appetite.

5. Cryptocurrencies

The cryptocurrency sector was broadly weak. Bitcoin's latest price remained range-bound around a post-decline consolidation zone, falling -0.65% on the day, suggesting that although global risk sentiment has improved, it has not smoothly translated into gains for high-volatility assets. Among related concept stocks, RIOT dropped by -0.28%, with relatively limited declines, indicating that mining stocks were mostly tracking Bitcoin's fluctuations. Meanwhile, CRCL plummeted by -20.11%, primarily due to valuation cuts triggered by weaker-than-expected earnings, which does not represent a broad-based weakening across the entire crypto sector.

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