Wall Street Daily (February 27): US stocks diverged on Thursday, with risk appetite cooling but not spiraling out of control; NVIDIA's 'profit-taking after positive results' weighed on the Nasdaq, while funds shifted to financials and small-cap stocks

Summary: US stocks diverged on Thursday, with the S&P 500 Index down 0.54%, the Nasdaq Composite down 1.18%, the Dow Jones Industrial Average up slightly by 0.03%, and the Russell 2000 Index rising 0.52%. The main theme was a pullback in large-cap tech stocks and style rebalancing. NVIDIA faced profit-taking after its earnings report, pressuring growth-sector valuations; meanwhile, weekly employment data showed continued resilience in the US labor market, driving fund inflows into financials and small caps. Over a three-month horizon, small-cap performance remains significantly stronger than large caps: IWM is up 15.88%, far exceeding SPY’s 5.97%, suggesting that funds are not solely clustering around mega-cap names. In broader asset classes, the US Dollar Index rose 0.14%, gold gained 0.31%, crude oil fell 0.15%, and Bitcoin retreated 0.74%, as risk assets shifted from broad gains the previous day to internal rotation.

I. Major Events

1. NVIDIA encounters 'profit-taking after positive results'

NVIDIA’s previously announced earnings and guidance remained at high levels, but concerns over high base growth, capital expenditure returns, and short-term valuation pressure have noticeably risen, leading to typical 'profit-taking after positive results.' This directly weighed on large-cap tech stocks, with the Nasdaq and growth styles feeling the most pressure. For the market, from the day’s trading perspective, the AI narrative has not become obsolete, but investor focus has shifted from 'chasing growth alone' to 'paying more attention to price and realization pace.'

2. Slight rise in US initial jobless claims

For the week ending February 21, US initial jobless claims rose to 212,000, a slight increase from the previous figure; continuing claims declined, indicating low pressure from mass layoffs. The data did not trigger recessionary panic but also failed to signal strong reflation. At least within this week’s data window, the market leaned toward accepting a 'moderate growth, style rotation' trading framework. As a result, the broader market did not experience systemic declines, but sector performances notably moved toward rebalancing, with financials and small caps showing relative strength.

3. Baidu's earnings report triggered repricing of Chinese concepts

After Baidu disclosed its performance, the market focused more on the gap between the decline in traditional businesses and the pace of AI monetization, putting overall pressure on the Chinese concept Internet chain. Capital’s valuation of 'storytelling' has clearly cooled, returning to focus on profit and cash flow quality. In contrast, Netflix explicitly stated it would not increase its bid for Warner, further strengthening capital discipline and the shareholder return framework, allowing it to gain a relative premium amidst M&A uncertainties and becoming one of the few bright spots among large tech companies that day.

II. Major Trends

From a three-month perspective, small-cap style remains significantly stronger than large-cap: IWM has cumulatively risen by 15.88%, significantly higher than SPY's 5.97%, indicating that capital is not just clustering around top-weighted stocks. Meanwhile, the industrial style continues to outperform technology; DIA rose 8.84% over three months, higher than QQQ's 4.08%, reflecting the market's continued pricing of 'profit spreading to the traditional economy.'

Market breadth also maintains a positive structure. The equal-weight index RSP rose 12.47% over three months, continuing to outperform SPY's 5.97%, showing that the rise is not solely supported by a few mega-cap stocks. In terms of style, value stocks (SPYV) rose 9.40% over three months, outperforming growth stocks (SPYG) at 3.05%. This trend of 'value dominance and breadth improvement' becomes even clearer as the technology sector experiences short-term pullbacks.

III. Market Sentiment

The sentiment feature on Thursday was 'risk appetite cooling but not out of control.' VIX rebounded to 18.63, rising 3.90% during the day, indicating increased demand for short-term pullback defense after fluctuations in the technology-focused main line. The CNN Fear & Greed Index fell from 46 to 44, still in a relatively cautious range, with market sentiment cooling slightly compared to the previous day.

However, from a structural perspective, sentiment did not enter extreme panic. On one hand, RSP's mid-term lead over SPY remains, meaning market breadth has not significantly weakened; on the other hand, the equity options Put/Call ratio of approximately 0.61 shows that bullish trading has not completely receded. Overall, this appears more like a cooling of high-valuation sectors and position rebalancing rather than an impact from systemic risks.

IV. Market Scan

1. Index ETFs:QQQ fell by 1.21%, serving as the core drag that day; IWM rose by 0.53%, continuing the relative strength of small caps. The market transitioned from 'technology single-line leadership' to a structure of 'growth profit-taking, breadth support.'

2. Industry sectors:XLF rose by 1.21%, leading the pack, showing that capital prefers directions with steadier cash flows and more comparable valuations; XLK fell by 1.40%, lagging behind, reflecting profit-taking pressures after the AI main line peaked. The widening divergence between finance and technology was the clearest industry signal of the day.

3. Seven major tech companies:NFLX rose by 2.29%, leading the M7, reflecting valuation support driven by disciplined mergers and acquisitions; NVDA fell by 5.46%, becoming the main drag; TSLA dropped by 2.11%, continuing its weak performance amid demand and competitive pressures. The internal dynamics of large tech firms have shifted from 'uniform rises and falls' to a clear differentiation between strong and weak performers.

4. Chinese concept stocks:Overall under pressure, with BIDU dropping by 5.65% at the forefront, followed by BILI down 3.20%, BABA falling 2.78%, KWEB declining 2.42%, and JD down 2.03%. FUTU bucked the trend with a 1.05% rise, becoming one of the few gainers in the sector, indicating that trading-oriented capital is still seeking localized opportunities for growth.

5. Cryptocurrencies:CRCL surged by 4.90%, continuing to attract investor attention following rapid growth in stablecoin infrastructure; MSTR fell by 1.66%, moving in tandem with the pullback in Bitcoin. The cryptocurrency space transitioned from broad gains the previous day to a phase of 'consolidation after gains, with selective highlights.'

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