Wall Street Brief (March 7): US stocks weakened again on Friday, with the four major indices closing lower collectively; disappointing non-farm data and surging oil prices deepened defensive trading in US stocks, leading to a broader risk contraction

Summary: US stocks weakened significantly again on Friday, with all four major indices closing lower: S&P 500 fell by 1.33%, Nasdaq fell by 1.59%, Dow Jones fell by 0.95%, and Russell 2000 dropped by 2.33%. The main trading narrative became clearer: first, weaker-than-expected non-farm payroll data brought concerns about 'slower growth' to the forefront, then the sharp rise in oil prices introduced new inflation pressures, prompting the market to more firmly shift towards defensive positioning. The VIX rose to 29.49, surging 24.17% in a single day, indicating a significant increase in hedging demand. Panic is no longer just marginally rising but has entered a high volatility zone. In terms of major asset classes, the US Dollar Index fell by 0.19%, gold rose by 1.80%, crude oil surged by 15.72%, and Bitcoin fell by 3.92%. Overall, the market has moved from a partial pullback into a broader phase of risk contraction.

I. Major Events

1. Weak non-farm payroll data failed to spark expectations of easing, triggering concerns over 'slowing growth'

The US non-farm payroll employment decreased by 92,000 in February, with the unemployment rate rising to 4.4%. This data was notably weaker than the market's previous expectations based on inertia. Typically, weaker data tends to make markets more inclined to bet on easing policies, but this time, the initial reaction wasn't about 'rate cut benefits,' but rather that 'growth is slowing.' Once growth expectations waver, the market’s imagination for corporate earnings gets compressed, making it harder for risky assets to maintain their valuations.

2. Surging oil prices, inflation taking the baton, creating a dual squeeze of 'growth + inflation'

Amid ongoing Middle East tensions, oil prices continued to surge, breaking through the $90 mark, bringing energy shocks back to the center of global market pricing. Coupled with concerns over slowing growth due to weak non-farm data, higher oil prices further increased cost pressures, making inflation stickier and complicating policy constraints. As a result, equity markets chose to reduce risks more thoroughly: the pressure is no longer solely on tech stocks but has spread to broader sectors such as finance, industrials, and real estate.

3. Chinese stocks show clear internal divergence, with earnings-driven moves outweighing pure sentiment volatility

Against the backdrop of declining overall risk appetite, Chinese stocks did not move uniformly. JD.com outperformed on better-than-expected results, while Bilibili continued to retrace after turning profitable. The market’s pricing of Chinese stocks is shifting from 'blanket sector sentiment' to 'earnings delivery outweighing sector sentiment,' with fundamental catalysts and risk discounts now playing a dual role.

II. Major Trends

Over a two-week horizon, short-term risk appetite continues to collapse: IWM’s two-week decline widened to 5.18%, underperforming QQQ’s single-day drop of 1.50%, indicating small caps are bearing the brunt of this pullback. Over a three-month view, the intermediate structure remains intact, with IWM still up 0.38% and RSP gaining 3.61%, both outperforming SPY’s -1.65%, suggesting a broader upward foundation previously existed. In terms of style, SPYV rose 2.50% over three months, significantly outpacing SPYG’s -5.14%, with value continuing to lead growth; over two weeks, SPYG fell 2.64%, weaker than SPYV’s -2.28%, reflecting sharper retracement in growth stocks. The current market appears squeezed by weak growth expectations and rising oil prices, leading to a reassessment of tolerance for growth and high-beta assets.

III. Market Sentiment

The VIX surged to 29.49, up 24.17% in a single day, indicating a significant rise in hedging demand. Panic is no longer just marginally escalating but has entered a high-volatility zone. The CNN Fear & Greed Index dropped to 27, further retreating from the previous day, with market sentiment sliding toward fear. Breadth snapshots show only 27.7% of stocks advancing, with new lows significantly outnumbering new highs, signaling the pullback has spread to a broader range of stocks. The Put/Call ratio in options remains around 0.96, reflecting a defensive rather than bottom-fishing stance toward volatility.

IV. Market Scan

1. Index ETFs

Index ETFs weakened across the board, with clear stratification in performance. DIA fell 0.96%, showing relative resilience, SPY dropped 1.31%, QQQ declined 1.50%, and IWM plummeted 2.29%, bringing up the rear. This corresponds to a market structure where funds are not concentrated in exiting any single sector but are prioritizing cuts in small-cap areas more sensitive to growth, financing, and risk appetite.

2. Sector Performance

At the sector level, only defensive consumer staples managed to eke out gains. XLP rose 0.43%, becoming one of the few positive performers of the day, indicating funds are flowing back into the more stable consumer defense chain. In contrast, XLK fell 2.06% to lead declines, followed by XLB down 1.91%, XLY down 1.81%, XLF down 1.29%, XLI down 1.23%, and XLRE down 1.04%, reflecting synchronized pressure on high valuation, cyclical, and interest-rate-sensitive sectors. The market dynamic is not merely a simple style rotation but closer to a broad-based risk reduction.

3. Seven tech giants

Within tech heavyweights, divergence continued but overall weakness persisted. NFLX fell 0.15%, showing relative resilience; NVDA dropped 3.01% to become the weakest performer, META fell 2.38%, and TSLA declined 2.17%. This indicates that amid weakening growth expectations and inflationary pressures from rising oil prices, market tolerance for high-valuation tech stocks continues to decline, with the AI narrative temporarily unable to single-handedly prop up the sector.

4. Chinese Equities

Chinese stocks showed clear divergence. JD.com surged 6.12%, becoming the strongest performer among Chinese stocks that day, reflecting direct support from better-than-expected earnings. NTES rose 3.36%, gaining momentum from sentiment in both Chinese stocks and Hong Kong tech stocks. Bilibili fell 3.44%, likely due to profit-taking after turning profitable and ongoing risk discounting. Overall, Chinese stocks are no longer solely driven by risk appetite swings; 'earnings delivery' is becoming more important than 'sector sentiment.'

5. Cryptocurrencies

Bitcoin fell 3.92%. PLTR rose 2.94%, maintaining strength in a broadly declining environment, indicating funds have not entirely abandoned high-growth themes. However, RIOT plummeted 9.20%, with its retracement significantly amplified against the backdrop of Bitcoin’s sharp decline.

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