Wall Street Daily (February 24): US stocks retreated across the board on Monday, with both technology and financial sectors falling; the return of tariff uncertainties cooled market risk appetite quickly, gold continued to rise/Bitcoin plummeted

Summary: US stocks fell across the board on Monday, with the S&P 500 Index down 1.04%, Nasdaq Index down 1.13%, Dow Jones Index down 1.66%, and Russell 2000 Index down 1.61%. VIX rose to 21.01, up 10.06% in a single day, as market risk appetite quickly cooled. After the Supreme Court ruled on tariff authority, Trump announced a 10% temporary tariff on all imports, which was soon raised to 15%. With inconsistent policy directions and unclear implementation timelines, concerns about the trade environment and corporate earnings resurfaced. Microsoft led the decline among tech heavyweights, while financials and discretionary consumption sectors also weakened. Meanwhile, the return of safe-haven funds provided some buffer against selling pressure, preventing the decline from spiraling out of control. In terms of major asset classes, gold rose 2.35% on safe-haven demand, crude oil remained largely flat with a slight drop of 0.03%, Bitcoin plunged 4.41%, and the US Dollar Index edged up 0.01%.

I. Major Events

1. Waller said whether to cut interest rates in March is like 'flipping a coin'

Fed Governor Waller stated that stronger-than-expected January employment data might delay rate cuts at the March meeting, but if February employment weakens, rate cuts should still proceed. He frankly stated it's more like 'flipping a coin' at this point. Following this statement, market certainty regarding the interest rate path declined, leading to amplified volatility in interest-rate-sensitive assets.

2. Uncertainty over tariff escalation returns

After the Supreme Court ruled that Trump overstepped his authority by using an emergency bill to impose tariffs, Trump announced a 10% temporary tariff on all imports, which was quickly raised to 15%. The scope of application, implementation pace, and whether further adjustments will be made remain 'up in the air.' This policy fluctuation has heightened concerns about global trade prospects and corporate profits, leading to a noticeable decline in risk appetite.

3. Rising worries about AI-driven displacement

Expectations around AI reshaping software business models have continued to ferment, prompting the market to reassess the growth quality and pricing power of some companies. Amid weakening sentiment, tech and communications sectors are under pressure, with growth stocks experiencing heavier selling; software-related firms have seen significant declines.

II. Major Trends

In the past two weeks, index divergence has been pronounced, with the Dow Jones Industrial Average rising 0.72% over two weeks to take the lead, while the Nasdaq Composite fell 2.47%, making it the weakest performer. This shows that traditional industries are relatively resilient, while tech-heavy stocks face short-term pressure. Over a three-month horizon, small-cap stocks have shown a clearer advantage: the Russell 2000 has risen 13.39%, significantly outperforming the S&P 500’s 2.88%, indicating signs of capital diffusion. Market breadth has also improved, with the equal-weighted index up 9.98% over three months, notably higher than the S&P 500’s 2.88%, reflecting broader-based gains. In terms of style, value stocks have risen 6.74% over three months, significantly better than growth stocks’ -0.48%; within two weeks, growth stocks saw deeper pullbacks (two weeks: SPYG -2.37% vs. SPYV 0.55%), maintaining a bias towards value.

III. Market Sentiment

The VIX rose to 21.01, surging 10.06% in a single day. The rise in volatility indicates a rapid increase in demand for safe-haven assets. The CNN Fear & Greed Index dropped to 38, down from 44 in the previous trading session, signaling renewed caution in sentiment. Market breadth remains weak, with the ratio of NYSE declining to advancing issues approximately 2.2:1, and the number of declining issues on the Nasdaq clearly outnumbering advancers; total market volume stood at 18.39 billion shares, below the 20-day average of 20.62 billion, suggesting a cooling of risk appetite, though not yet escalating into full-blown panic selling.

IV. Market Scan

1. Index ETFs

Amid uncertainties over tariffs and fluctuating interest rate expectations, risk appetite retreated, causing major index ETFs to weaken across the board: SPY fell 1.02%, QQQ dropped 1.22%, DIA declined 1.63%, and IWM slipped 1.56%. Both large-cap and small-cap stocks pulled back simultaneously, with declines in financials and technology amplifying the index losses.

2. Sector Performance

The financial sector led the decline, with XLF plummeting 3.35%, as tariff volatility and unstable interest rate expectations drove capital toward defensive positioning. The consumer discretionary sector (XLY) fell 2.09%, industrials (XLI) dropped 1.35%, communication services (XLC) declined 1.23%, and technology (XLK) slid 1.68%, all tracking weaker risk sentiment. Defensive sectors remained relatively resilient, with consumer staples (XLP) rising 1.23% and healthcare (XLV) gaining 1.10%, buoyed by Eli Lilly and Co’s strength, which attracted inflows into pharmaceuticals.

3. The Magnificent Seven Tech Stocks

Divergence among tech heavyweights intensified. NVIDIA rose 0.91%, showing relative resilience amid widespread sector declines; Microsoft fell 3.21%, Meta dropped 2.81%, Tesla declined 2.91%, and Netflix slid 3.37%. As the market reassesses the impact of AI and valuation floors, investor sentiment towards high-beta large-cap stocks has grown more cautious.

4. Chinese Equities

Chinese equities showed mixed performance, with PDD Holdings rising 0.78%, Futu falling 5.55%, and Tencent Music dropping 3.22%. Lacking clear catalysts, these stocks largely followed broader swings in risk appetite.

5. Cryptocurrencies and Related Stocks

Bitcoin's latest price fell 4.41%, reflecting a notable weakening in crypto market sentiment amid broad-based pressure on risk assets. Cryptocurrency-related stocks also retreated, with Coinbase dropping 6.48% and Riot declining 0.19%, as appetite for high-volatility assets diminished.

$NASDAQ 100 Index (.NDX.US)$ $Invesco QQQ Trust (QQQ.US)$ $Dow Jones Industrial Average (.DJI.US)$ $State Street® SPDR® Dow Jones Industrial Average® ETF Trust (DIA.US)$ $Russell 2000 Index (.RUT.US)$ $iShares Russell 2000 ETF (IWM.US)$ $Roundhill Magnificent Seven ETF (MAGS.US)$ $USD (USDindex.FX)$ $U.S. 10-Year Treasury Notes Yield (US10Y.BD)$ $iShares 20+ Year Treasury Bond ETF (TLT.US)$ $XAU/USD (XAUUSD.CFD)$ $CBOE Volatility S&P 500 Index (.VIX.US)$ $Bitcoin (BTC.CC)$ $BTC/USD (BTCUSD.CC)$ $Ethereum (ETH.CC)$ $ETH/USD (ETHUSD.CC)$ $iShares Ethereum Trust ETF (ETHA.US)$ $NVIDIA (NVDA.US)$ $Tesla (TSLA.US)$ $Meta Platforms (META.US)$ $Amazon (AMZN.US)$ $Alphabet-C (GOOG.US)$ $Microsoft (MSFT.US)$ $Apple (AAPL.US)$

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