Wall Street Daily (March 6): US stocks weakened again on Thursday, with deeper pullbacks in small caps and cyclical sectors; oil prices surged to new highs, and the market returned to a defensive trading mode

Summary: US stocks weakened again on Thursday, with all four major indices closing lower: the S&P 500 fell by 0.56%, Nasdaq fell by 0.26%, Dow Jones fell by 1.61%, and Russell 2000 fell by 1.91%. The VIX rose to 23.75, increasing by 12.29% in a single day, indicating a renewed rise in risk hedging demand. The trading focus shifted back from the previous day's recovery rally to a defensive mode of 'rising oil prices + rising interest rates,' suppressing the valuation of risky assets, with deeper pullbacks in small caps and cyclical sectors. In terms of major asset classes, the US Dollar Index rose by 0.24%, crude oil rose by 3.63%, gold fell by 1.09%, and Bitcoin fell by 2.44%. Overall, the market did not experience a trend collapse, but in a high-volatility environment, risk appetite has clearly slowed down.

I. Major Events

1. Oil price shocks re-dominate pricing, with indexes unable to reverse weakness at the close

Affected by the escalation of conflicts in the Middle East, oil prices significantly rose during the trading session and remained at high levels. The market immediately refocused its attention on the variable of 'rising energy costs' and worried about its potential to further push up inflation and squeeze corporate profit margins. The Dow Jones Industrial Average plummeted sharply during the session, although it partially recovered some losses towards the close, it still ended notably weaker, showing that in a phase of heightened uncertainty, capital prioritizes reducing risk exposure.

2. Weekly employment data remained resilient, delaying rate-cut trades further

The US weekly initial jobless claims stayed at 213,000, showing no sudden deterioration in the labor market. While employment resilience is generally positive, against the backdrop of rising oil prices, markets are more likely to interpret it as a signal that 'high interest rates will persist longer.' Expectations for rate cuts continue to be pushed back, adding valuation pressure on growth and small-cap stocks.

3. The AI sector showed 'pockets of resilience,' but overall risk appetite continued to decline

That day, the tech sector did not experience a broad sell-off; some AI-related leaders still managed to provide support against the trend, indicating that the long-term main theme had not disappeared. However, judging from index performance and market breadth, funds preferred structural allocation rather than fully loading up on risky assets. The overall pattern remained one of 'thematic highlights with defensive undertones.'

II. Major Trends

Over a two-week horizon, the divergence between strong and weak sectors within the market became more pronounced: QQQ was up 0.90% over two weeks, while IWM fell to -2.96%, showing significantly weaker risk appetite among small caps compared to tech-heavy stocks. Over a three-month horizon, the structural main theme had not changed: IWM’s +2.73% outperformed SPY’s -0.35%, and RSP’s +4.86% continued to lead, suggesting that the mid-term trend was not driven solely by a few giants. In terms of style, SPYV’s +3.60% significantly outpaced SPYG’s -3.61%, with value continuing to suppress growth. The current market appears to be undergoing short-term repricing amid high oil price disruptions, rather than a complete overhaul of its mid-term structure.

III. Market Sentiment

The VIX rose to 23.75, up 12.29% in a single day, indicating a renewed rise in demand for risk hedging. The CNN Fear & Greed Index fell to 34 (from 37 previously), with sentiment shifting back toward fear. Market breadth snapshots showed a significantly higher number of declining stocks versus advancing ones, with new lows outnumbering new highs, demonstrating that the pullback was not just due to a few heavyweights but reflected broader risk contraction. The total Put/Call ratio on options hovered around 0.96, reflecting that the market was maintaining a defensive position. It should be noted that snapshot measures of breadth and options may fluctuate intraday and are better suited for cross-sectional observation rather than strict closing conclusions.

IV. Market Scan

1. Index ETFs

Index ETFs exhibited 'widespread declines but clear stratification.' QQQ fell 0.30%, showing relative resilience, DIA dropped 1.62%, and IWM fell 1.91%, becoming the weakest performer of the day. This corresponded to a continued avoidance of small-cap assets that are more sensitive to growth and financing conditions, with defensive trades regaining prominence.

2. Sector Performance

At the sector level, only energy maintained positive returns. XLE rose 0.52%, leading the gains for the day, directly benefiting from the rise in oil prices; XLI fell 2.22%, leading the declines, while XLB dropped 2.10%, XLP fell 2.01%, and XLV slid 2.00%, all weakening in sync. This indicated that the market was both concerned about rising costs and reassessing growth prospects, making even traditional defensive sectors struggle to fully 'weather the storm.'

3. Seven tech giants

Within the heavyweight tech stocks, divergence continued. MSFT rose 1.35%, becoming a relatively strong stock, reflecting that funds were still willing to allocate to leaders with higher cash flow and fundamental certainty; META fell 1.07%, showing that during a period of declining risk appetite, valuation elasticity within growth assets would still be compressed.

4. Chinese Equities

Chinese concept stocks faced overall pressure, with only JD maintaining relative resilience, rising 0.28%. BILI plunged 7.09%, leading the declines, TME fell 4.74%, NTES dropped 2.64%, and BABA slid 2.19%, with high-elasticity stocks experiencing deeper pullbacks. Even though there might have been positive developments for individual companies, the day's pricing was clearly dominated by risk appetite, with funds largely discounting the entire sector based on a 'de-risking' logic.

5. Cryptocurrencies

The same reflects 'structural divergence + risk contraction.' CRCL rose 0.45%, maintaining a small positive return, but RIOT fell 5.63%, with its pullback amplified against the backdrop of Bitcoin's 2.44% decline. Overall, the market has not completely withdrawn from high-beta assets, but positions are becoming more selective.

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