Author: Deep Tide TechFlow

U.S. Stocks: PPI Spike Triggers Panic, February Ends Disappointingly

On Friday, a number shattered all market fantasies.

The U.S. Producer Price Index (PPI) for January surged 0.5% month-over-month (expected 0.3%), with core PPI skyrocketing 0.8% (expected 0.3%), which is 2.7 times the expectation.

The market collapsed instantly.

The Dow Jones fell 521 points (-1.05%) to 48,978, the S&P 500 dropped 0.43% to 6,879, and the Nasdaq fell 0.92% to 22,668.

This marks the third trading day of declines this week. On the last trading day of February, the three major indices collectively ended in the green: the Nasdaq fell over 3% for the month, marking its worst single-month performance since March of last year; the S&P 500 fell nearly 1% for the month; the Dow barely held a 0.2% monthly gain.

The blow from the inflation data completely destroyed the hopes for interest rate cuts.

The probability of a March rate cut by the Fed dropped from 10% to 5%, from 30% to 18% for April, and from 85% to 57% for June. The market began to price in "less and later rate cuts," and some even started to worry that if inflation remains stubborn, will the Fed raise rates again?

Schwab's Chief Fixed Income Strategist Collin Martin stated: "Inflation still dominates monetary policy. Given that the labor market has stabilized, inflation data will become key in determining the direction of future Fed meetings."

Widening Divisions: Defensive Sectors Surge, Tech Stocks Collapse

The market in February told a story of "great rotation."

Defensive sectors led the gains:

• The utilities sector (XLU) surged 10% for the month, marking its best monthly performance since 2003
• Consumer staples (XLP) rose 8%
• The energy sector (XLE) has increased 24% year-to-date, continuing to lead

Tech stocks plummeted across the board:

• The three major tech-heavy sectors - communication services (XLC), technology (XLK), and consumer discretionary (XLY) - fell 2-4% in February
• The iShares Technology Software ETF (IGV) plunged nearly 10% in February and has fallen 23% year-to-date
• The financial sector (XLF) lagged

The "seven giants" collectively fell silent. Except for Apple, which barely stayed flat, all others declined: Amazon fell nearly 1%, Microsoft and Meta dropped over 2% and 1% respectively.

The famous saying of technical analysis master Ralph Acampora circulated in the market: "Sector rotation is the lifeline of a bull market." The S&P 500 equal-weight index (SPXEW) rose 2.64% over the past month, while the S&P 500 fell 0.6% and the Nasdaq 100 fell 2.6%.

In the midst of ruins, Dell proved with its earnings report: The demand for AI is real.

On Friday, Dell surged 21.9% to $148, marking its largest single-day gain in two years, with a trading volume exceeding 18 million shares, double the usual.

This is another "AI revaluation" moment for Dell following the single-day surge of 32% in February 2024.

The earnings numbers are shocking:

Q4 FY2026 (ending January 30):

Revenue of $33.4 billion, +39% year-on-year, exceeding expectations by $4.6 billion; non-GAAP earnings per share of $3.89, +45% year-on-year, exceeding expectations by $1.0; quarterly revenue from AI servers of $9 billion, skyrocketing 342% year-on-year; revenue from the infrastructure solutions segment of $19.6 billion, +73% year-on-year.

Even crazier are the orders and backlog: Q4 AI server orders were $34.1 billion; cumulative AI server orders for FY2026 exceeded $64 billion; AI server backlog at the end was $43 billion.

Dell Vice Chairman Jeff Clarke said: "FY2026 is a decisive year in the company's history. The AI opportunity is transforming our company. We have completed over $64 billion in AI server orders, shipped over $25 billion, and entered FY2027 with a record backlog of $43 billion. This is a strong testament to our engineering leadership and differentiated AI solutions winning in the market."

Dell's surge gave the market a key signal: AI infrastructure demand is real, but the market is selectively believing.

Nvidia's perfect earnings report plummeted 5.5%, while Dell's perfect earnings report surged 22%. Despite both being related to AI, why is their fate so different?

The answer may be: Dell's backlog of orders ($43 billion) provided the market with "visibility," while Nvidia's guidance of $78 billion was seen as "overdrawing future."

Cryptocurrency Market: Bitcoin Falls Below $66,000, Ethereum Loses $2,000

On Friday, the cryptocurrency market fell alongside U.S. stocks.

Bitcoin dropped 1.97% to $65,864, at one point falling below the $66,000 mark. Ethereum plummeted 4.39% to $1,930, losing the psychological barrier of $2,000. Solana fell 4.13% to $82.13, Cardano dropped 2.82%, and Dogecoin fell 3.14%.

CoinDesk analyst Daniel Reis-Faria stated: "What you're seeing now is Bitcoin trading in sync with the broader risk markets. The Nasdaq fell after Nvidia's earnings report, and cryptocurrencies followed suit. Bitcoin quickly approached $70,000, but when the momentum of the stock market stalled, that quick money also exited just as fast."

This drop resembled a leveraged washout rather than a structural collapse. Hourly charts showed green across the board on Friday morning, indicating that most of the selling occurred overnight, and buyers had quietly returned at these levels.

However, the macro environment remains grim: January's PPI spike indicates inflation is far from over, with expectations for rate cuts further delayed; credit spreads are widening, private equity companies are plummeting, and concerns over credit pressures are rising; Bitcoin is down about 24% year-to-date, having nearly halved from the October peak of $126,186.

Gold and Silver: Risk Aversion Fuels Surge, Gold at $5,296, Silver Soars 19% in February

Gold surged $102 (+1.97%) to $5,296 per ounce, just 2% away from the historical closing high at the end of January.

Silver "rose from the ashes" after its historic plunge at the end of January, soaring 19% in February, marking ten consecutive months of gains.

Copper prices edged up over 1% in February, just 3% away from historical highs, continuing to support hard asset buying.

The logic behind the precious metal rebound:

1. Stubborn inflation: The PPI spike proves that inflation is far from over, raising demand for safe havens
2. Softening dollar: Despite high inflation, the dollar index weakened due to trade frictions and the Supreme Court overturning tariffs
3. Geopolitical tensions: U.S.-Iran nuclear negotiations are at an impasse, and Trump warns Iran that "time is running out"
4. Cracks in the credit market: Panic spreads in the private credit market, flooding into gold and treasury bonds for safety

Today's Summary: The Ghost of Inflation Returns, AI Faith Begins to Waver

On February 28, the market gave a dismal period of two months before 2026 a somber conclusion.

January's PPI was shocking, with core PPI surging 0.8%, 2.7 times the expectation. Hopes for rate cuts were thoroughly dashed, with the probability of a June rate cut plummeting from 85% to 57%.

The Nasdaq fell over 3% in February, marking its worst month since March of last year. The iShares Technology Software ETF fell nearly 10% for the month and has dropped 23% year-to-date. The seven giants fell silent collectively, with only Dell surging 22% on the back of a $43 billion backlog of AI server orders, becoming a lone hero among the ruins.

Block cut its workforce by 50%, CoreWeave plummeted 20%, and financial stocks crashed amid panic from private credit—"AI replacing human" anxiety and "credit contagion" panic spread simultaneously.

Bitcoin fell below $66,000, Ethereum lost $2,000, and the cryptocurrency market collectively declined alongside risk assets.

Gold soared to $5,296, and silver surged 19% in February, with risk aversion pushing precious metals back to high levels.

The market is asking one question: Is inflation a temporary fluctuation, or is it making a comeback?

If the answer is the latter, then the Fed may not only refrain from cutting rates but may even be forced to raise rates again. This would spell nightmares for tech stocks with lofty valuations, cryptocurrencies with high leverage, and risk assets reliant on liquidity.

Dell's $43 billion backlog orders proved the reality of AI demand, but the market no longer believes in the "AI story" unconditionally—it wants to see profits, see ROI, and see if this $700 billion cloud giant's capital expenditure can truly translate into shareholder returns.

February has ended, but the nightmare of inflation has just begun.