Wall Street Brief (March 20): US stocks were weak and volatile on Thursday, with a severely 'twisted' market structure; oil prices and the US dollar fell simultaneously as the market shifted from panic selling to structural game-playing

Summary: On Thursday, the overall US stock market remained weak, but the market structure was even more 'twisted' compared to previous days. The S&P 500 Index fell by 0.27%, the Nasdaq Index dropped by 0.28%, the Dow Jones Index declined by 0.44%, while the Russell 2000 Index rose against the trend by 0.65%. The VIX fell to 24.06, down 4.11% in a single day, indicating that the panic brought on by the surge in oil prices earlier in the day eased somewhat during trading. The most critical macro variable of the day was the simultaneous decline in crude oil and the US dollar: crude oil fell by 4.50%, and the US Dollar Index dropped by 1.10%. External pressures did ease somewhat, but the three major indices failed to turn positive, and the market did not show a typical recovery pattern of 'risk assets rising together.' Structurally, small-cap and some high Beta stocks received short-term corrections, while energy maintained relative strength; Chinese stocks notably weakened due to pressure from Alibaba's earnings report. Overall, this day seemed more like a repositioning after panic subsided rather than a true return of risk appetite.

I. Major Events

1. Oil prices surged then retreated, narrowing the deep losses in US stocks to minor declines

The key point for Thursday’s market wasn’t how much the indices ultimately fell, but that intraday shocks were noticeably 'cooled down.' Crude oil continued to exert pressure early in the session, dragging down risk assets; however, as oil prices retreated from their highs, the stock market’s losses gradually narrowed. In the end, the S&P, Nasdaq, and Dow only posted slight declines, while the Russell 2000 managed to turn positive. This suggests the market partially unwound its extreme pricing of 'out-of-control oil prices,' but this appears more like removing part of the worst-case scenario rather than fully shifting back to an offensive stance.

If Thursday had marked a clear 'return of risk,' the common picture would have been a strengthening of the broader market, with tech heavyweights leading gains and high-volatility assets synchronously recovering. However, this was not the case: the US Dollar Index fell by 1.10%, the VIX dropped by 4.11%, crude oil declined by 4.50%, and external pressures appeared to ease. Yet, the S&P, Nasdaq, and Dow all closed lower, and Bitcoin also fell by 1.36%. What truly strengthened were the Russell 2000 and some high Beta stocks. This looks more like a transactional recovery of 'rotation between highs and lows' after panic subsided, rather than the start of a trend reversal.

2. Alibaba's earnings report missed expectations, compressing risk appetite for Chinese stocks

The most significant disruption to the China concept stocks today came from Alibaba. After the company announced its quarterly earnings up to December 2025, the market was not satisfied with its revenue and profit performance, causing the stock price to plummet by 7.09% in a single day. This decline did not stop at a single stock: Futu fell by 3.59%, PDD Holdings dropped by 3.27%, and Baidu declined by 2.35%, indicating that funds were synchronously reducing their positions in China concept stocks following the earnings shock. Tencent Music only fell by 0.10%, showing relative resilience but not implying an improvement in sector sentiment.

II. Major Trends

The medium-term framework has not fundamentally changed, with the market still presenting a structure of 'slightly better breadth than weight, value outperforming growth, and short-term adjustments in tech giants.' Over a three-month horizon, RSP outperformed SPY (0.63% vs -3.05%), suggesting that broader components are still performing better than indices solely dominated by weights; SPYV outperformed SPYG (-0.70% vs -5.10%), showing that funds have recently preferred value style over chasing high-valuation growth. Meanwhile, over a two-week horizon, MAGS has fallen by 4.20%, indicating that the most crowded trades in tech giants are still being digested. Taken together, Thursday's small-cap recovery appears more like rebalancing after crowded positions loosened, insufficient to bring the market back to the upward rhythm of 'weight-led, index resonance'.

III. Market Sentiment

Market sentiment is slightly better than price performance but still far from healthy. The VIX fell back to 24.06, indicating that panic had eased compared to the previous day, but it remains in a relatively high volatility zone above 24, showing the market is still sensitive to sudden shocks. The CNN Fear & Greed Index rebounded from 15 to 17, which can only be considered a slight rise from a very weak position, still within the deep fear zone. More notably, RSP continued to outperform SPY over a three-month period, suggesting that the internal market is not entirely reliant on a few superweights for support; however, elevated volatility still indicates that investors have not truly abandoned defensive postures. Current sentiment is closer to 'panic subsiding' rather than 'risk appetite rebuilding'.

IV. Market Scan

1. Index ETFs

A rare strong contrast emerged within index ETFs: IWM rose by 0.65% to close in positive territory, while DIA fell by 0.42% to weaken. The former, representing small caps, recovered first, while the latter, representing traditional blue chips, remained under pressure, clearly pointing to the day’s theme being 'rotation between highs and lows' rather than broad-based index gains. Both SPY and QQQ also saw minor declines, further illustrating that funds are more willing to find elasticity within internal structures rather than betting on a restart of the overall market.

2. Sector Performance

At the sector level, XLE rose by 1.59%, continuing to lead, even as crude oil closed lower. The energy sector is still digesting expectations of supply premium brought by Middle East risks. In contrast, XLB fell by 1.53%, becoming the weakest sector, with materials and pro-cyclical directions lacking sustained buying. This combination means: although external pressures have eased somewhat, the market has not returned to a 'comprehensive lift' risk mode, and instead looks more like energy maintaining its premium while other sectors rotate cautiously.

3. Seven tech giants

Large tech companies still lack consistency internally. GOOG fell by 0.19%, the most stable among the seven major tech stocks, but merely showed resilience; TSLA fell by 3.18%, NFLX fell by 3.13%, and high-elasticity tech continues to adjust. As long as the weights at the 'elasticity end' remain significantly pressured, the market will struggle to recreate the familiar rhythm of 'tech dominance and synchronized index gains'.

4. Chinese Equities

China concept stocks were generally weak on Thursday. Alibaba's 7.09% drop was the clearest source of pressure, with the market directly revising down expectations for its short-term profitability and growth realization after the earnings release. Futu, PDD Holdings, and Baidu fell by 3.59%, 3.27%, and 2.35% respectively, indicating that selling pressure had spread from a single earnings report to the entire China tech chain. Tencent Music only fell by 0.10%, mostly showing relative resilience, and does not indicate a substantial repair in risk appetite for China concept stocks.

5. Cryptocurrencies

The crypto chain also reflects 'structural repairs' rather than overall strength. Bitcoin fell by 1.36%, with the main risk asset narrative remaining cautious; however, MARA rose against the trend by 3.36%, indicating that some funds chose to make short-term bets on high-beta individual stocks. Conversely, CRCL fell by 3.40%, with the stablecoin and payment narrative failing to become a new defensive anchor. Such divergence often occurs when the broader market has yet to stabilize, but internal market participants start tentatively seeking elasticity.

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