Wall Street Briefing (March 13): US stocks retreated across the board on Thursday, with small-cap and cyclical stocks leading the declines; surging oil prices and inflation concerns have shifted the market from a fragile balance back to a high-pressure defensive stance

Summary: US stocks weakened again on Thursday, with the S&P 500 Index down 1.52%, Nasdaq down 1.78%, Dow Jones down 1.56%, and Russell 2000 Index down 2.12%; VIX rose to 27.29, surging 12.63% in a single day, returning the market to a high-pressure defensive state. The dominant factor of the day was not individual company news but a 9.03% surge in crude oil, which reignited concerns over spillover effects from the Iran conflict, the return of energy-driven inflation, and slower interest rate cuts after oil prices returned to $100. Although Oracle's earnings continued to provide some support for tech stocks, macro shocks clearly outweighed fundamental positives. In major asset classes, the US Dollar Index rose by 0.48%, gold fell by 1.88%, and Bitcoin dropped by 0.28%. Overall, the market shifted from a fragile equilibrium the previous day to full defense mode, with risk appetite noticeably contracting.

I. Major Events

1. Oil prices surged above $100, pulling the market back into full defense mode

The core variable on Thursday remained the supply uncertainty caused by the Iran war. International oil prices approached and broke through the $100 mark, indicating that the market has not significantly cooled its pricing of Middle East conflicts. Once oil prices rise to this range, the market often first thinks not about daily fluctuations, but rather 'how long will high energy costs persist?' Under such expectations, equity assets quickly reverted to risk contraction mode: all four indices collectively retreated, with Russell 2000 and cyclical sectors experiencing deeper declines. For the market, trading logic also shifted - from 'first observing the shock' to 'starting to withstand the shock'.

2. High oil prices amplify concerns over sticky inflation, making it hard for rate cut expectations to rise further

US February CPI year-on-year was 2.4%, month-on-month 0.3%, originally just a mild but not decisive inflation reading. However, on Thursday, the sharp rise in oil prices led to a reinterpretation of this data: inflation may slow at an even slower pace and could see repeated spikes in the energy component. As a result, it became harder for investors to continue betting on 'rapid easing,' with growth and small-cap sectors relying more heavily on valuation support facing greater pressure. Both the Nasdaq and Russell indexes weakened during the session, reflecting simultaneous contractions in rate expectations and risk appetite.

Oracle's strong performance fails to reverse tech sector pullback

Oracle's previously announced results and guidance continue to reinforce the narrative of strong AI cloud demand, but on Thursday, it was not enough to offset macro-level pressures. The technology sector still retreated overall, albeit with smaller declines compared to small-cap and cyclical stocks. The market’s signal is clear: when macro risks rise, positive earnings are still 'useful,' but they manifest more as relative resilience—declining less—rather than driving a complete reversal in market style.

II. Major Trends

From a two-week perspective, the decline in small-cap stocks continues to accelerate, with IWM's two-week loss widening to 6.99%, indicating that risk budgets are still being withdrawn from high-volatility assets. Meanwhile, the intermediate-term structure of the market has not returned to 'tech dominance': over a three-month horizon, RSP still outperforms SPY (0.46% vs -2.01%), and SPYV continues to lead SPYG (-0.29% vs -3.53%), showing that breadth and value remain dominant. In other words, Thursday’s broad-based decline did not overturn the old trend; instead, the existing framework of 'value outperformance and growth weakness' was further reinforced by the oil price shock. In the short term, the market is closer to 'continued defensive trading' rather than a simple pullback.

III. Market Sentiment

Market sentiment deteriorated significantly on Thursday. The VIX rose to 27.29, surging 12.63% in a single day, reflecting a rapid increase in hedging demand as the market re-entered a high-volatility zone. The CNN Fear & Greed Index dropped from 25 to 21, signaling that investor sentiment slid further into fear territory. Meanwhile, over a three-month horizon, RSP continued to outperform SPY, indicating that even during widespread declines, the market has not reverted to relying solely on a few mega-cap stocks for support. The elevated Put/Call ratio further demonstrates that defensive positions have not loosened. Overall, while there was no panic-driven sell-off, sentiment clearly shifted from观望 (observation) to contractionary defense, deepening the defensive tone.

IV. Market Scan

1. Index ETFs

Index ETFs closed down across the board, with SPY falling 1.52%, QQQ declining 1.72%, DIA dropping 1.54%, and IWM sliding 2.15%. Among these, IWM, representing small caps, suffered the deepest losses, directly reflecting the impact of risk aversion on high-elasticity assets. Although QQQ also weakened significantly, it remained relatively 'steadier' compared to small caps, showing that tech heavyweights still provided some support during market downturns.

2. Sector Performance

Sector performance highlighted a stark contrast between 'energy strength and broad weakness elsewhere.' XLE rose 0.93%, becoming one of the few sectors to hold onto positive gains, directly benefiting from crude oil’s 9.03% surge. In contrast, XLI fell 2.51%, XLY dropped 2.30%, and industrials and consumer discretionary sectors, which are highly sensitive to changes in growth expectations and risk appetite, saw deeper pullbacks. XLK declined 1.84%, indicating that tech could not remain insulated. Further, declines in XLV (1.76%), XLF (1.63%), and XLC (1.48%) underscored that this was not an isolated adjustment but more akin to a 'risk reduction across the entire market.'

3. Seven tech giants

There were no true winners among the Magnificent Seven on the day. NFLX fell 0.61%, merely showing relative resilience. TSLA dropped 3.14%, quickly reversing previous gains after favorable sales data, suggesting that short-term funds are increasingly intolerant of growth narratives. META declined 2.55%, reflecting how high-valuation platform stocks are more vulnerable under rising interest rates and contracting risk appetites. Overall, the tech sector appeared to be in passive defense mode rather than active offense.

4. Chinese Equities

Chinese ADRs also showed mixed performance. TME rose 2.47%, emerging as one of the few逆势 gainers. FUTU fell 6.31%, ranking among the weakest performers, indicating significant profit-taking around its earnings window. BILI dropped 2.43%, with high-elasticity Chinese names continuing to bear the brunt of waning risk appetite. Overall, Chinese stocks lacked a unified upward or downward trend, with capital tending to first exit higher-volatility and valuation-sensitive names.

5. Cryptocurrencies

Bitcoin’s latest price reflected a 0.28% decline for the day, with high-volatility assets failing to attract additional inflows. Within the crypto concept stocks, divergence persisted: MARA gained 2.46%, demonstrating some independent elasticity, while HOOD fell 3.27%, reflecting trading platforms’ heightened sensitivity to shifts in risk appetite. Overall, the crypto space did not exhibit systemic resonance, with movements largely driven by localized thematic fluctuations amid broader market pullbacks.

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