February 28 Market Recap: Inflation Nightmare Repeats, Defensive Sectors Soar, Tech Stocks Collapse
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February 28 Market Recap: Inflation Nightmare Repeats, Defensive Sectors Soar, Tech Stocks Collapse
February is over, but the inflation nightmare has just begun.
Navigating Web3 tides with focused insightsAuthor: TechFlow
U.S. Equities: PPI Shock Triggers Panic, February Ends on a Bleak Note
On Friday, one number shattered all market illusions.
The U.S. Producer Price Index (PPI) for January surged 0.5% month-on-month (vs. expected 0.3%), while core PPI jumped sharply by 0.8% (vs. expected 0.3%)—2.7 times the consensus forecast.
Markets instantly collapsed.
The Dow Jones Industrial Average plunged 521 points (–1.05%) to 48,978; the S&P 500 fell 0.43% to 6,879; and the Nasdaq Composite dropped 0.92% to 22,668.
This marked the third consecutive trading-day decline this week. On the final trading day of February, all three major indices closed in the red: The Nasdaq fell over 3% for the month—the worst monthly performance since March last year; the S&P 500 declined nearly 1%; and the Dow barely clung to a 0.2% monthly gain.
The inflation data delivered a brutal blow, completely demolishing rate-cut expectations.
The probability of a Fed rate cut in March dropped further—from 10% to 5%; April’s probability fell from 30% to 18%; and June’s probability tumbled dramatically from 85% to 57%. Markets are now pricing in “fewer cuts, later cuts”—and some investors are even beginning to worry whether the Fed might resume hiking if inflation remains stubborn.
Collin Martin, Chief Fixed Income Strategist at Charles Schwab, stated bluntly: “Inflation remains the dominant driver of monetary policy. With the labor market having stabilized, inflation data will be the decisive factor guiding the Fed’s path forward at upcoming meetings.”
Deepening Divergence: Defensive Sectors Soar, Tech Stocks Crumble
February’s market told a story of “massive rotation.”
Defensive sectors led gains:
- The Utilities sector (XLU) surged 10% for the month—the best monthly performance since 2003.
- Consumer Staples (XLP) rose 8%.
- Energy (XLE) is up 24% year-to-date, continuing to lead all sectors.
Tech stocks suffered broad-based losses:
- Three tech-heavy sectors—Communication Services (XLC), Technology (XLK), and Consumer Discretionary (XLY)—fell 2–4% in February.
- The iShares U.S. Technology Software ETF (IGV) plummeted nearly 10% in February and is down 23% year-to-date.
- Financials (XLF) were the worst-performing sector.
The “Magnificent Seven” collectively underperformed. Aside from Apple, which held flat, all others declined: Amazon fell nearly 1%, while Microsoft and Meta dropped over 2% and 1%, respectively.
Ralph Acampora, renowned technical analyst, once said: “Sector rotation is the lifeblood of a bull market.” Over the past month, the S&P 500 Equal Weight Index (SPXEW) rose 2.64%, while the S&P 500 fell 0.6% and the Nasdaq-100 dropped 2.6%.
Amid the wreckage, Dell delivered earnings that proved AI demand is real.
Dell soared 21.9% to $148 on Friday—the largest single-day gain in two years—with volume exceeding 18 million shares, double its average.
This marks Dell’s second “AI re-rating” moment—following its 32% single-day surge in February 2024.
The earnings figures were staggering:
Fiscal Q4 2026 (ended January 30):
Revenue totaled $33.4 billion, up 39% year-on-year and $4.6 billion above expectations; non-GAAP EPS was $3.89, up 45% YoY and 10% above estimates; AI server revenue hit $9 billion, surging 342% YoY; Infrastructure Solutions Group revenue reached $19.6 billion, up 73% YoY.
Even more astonishing were orders and backlog: Q4 AI server orders totaled $34.1 billion; cumulative AI server orders for fiscal 2026 exceeded $64 billion; and end-of-quarter AI server backlog stood at $43 billion.
Jeff Clarke, Dell’s Vice Chairman: “Fiscal 2026 has been a defining year for our company. The AI opportunity is transforming us. We have secured over $64 billion in AI server orders, shipped over $25 billion, and entered fiscal 2027 with a record $43 billion in backlog—a powerful testament to our engineering leadership and differentiated AI solutions delivering results.”
Dell’s surge sent a critical signal to markets: AI infrastructure demand is real—but investors are choosing selectively.
Nvidia posted a flawless earnings report yet fell 5.5%; Dell posted an equally stellar report and surged 22%. Same AI theme—why such divergent outcomes?
The answer may lie in: Dell’s $43 billion backlog provides tangible “visibility,” whereas Nvidia’s $78 billion guidance is perceived by markets as “future over-earnings.”
Crypto Market: Bitcoin Breaks Below $66,000; Ethereum Falls Below $2,000
On Friday, crypto markets slid alongside U.S. equities.
Bitcoin fell 1.97% to $65,864, briefly dipping below the $66,000 threshold. Ethereum plunged 4.39% to $1,930, breaking below the key psychological $2,000 level. Solana dropped 4.13% to $82.13; Cardano fell 2.82%; and Dogecoin declined 3.14%.
CoinDesk analyst Daniel Reis-Faria: “What you’re seeing now is Bitcoin trading in lockstep with broader risk assets. The Nasdaq declined following Nvidia’s earnings report—and crypto followed suit. Bitcoin had rapidly approached $70,000, but when equity momentum stalled, fast money exited just as quickly.”
This pullback resembles a leveraged liquidation—not a structural collapse. Hourly charts show markets turned uniformly red Friday morning, indicating most selling occurred overnight, while buyers have quietly re-emerged at these levels.
Yet the macro backdrop remains daunting: January’s PPI shock pushed rate-cut expectations further out; credit spreads widened; private equity firms plunged sharply; and concerns about credit stress intensified. Bitcoin remains down roughly 24% year-to-date, nearly halved from its October high of $126,186.
Gold & Silver: Safe-Haven Demand Drives Gains—Gold Hits $5,296; Silver Soars 19% in February
Gold surged $102 (+1.97%) to $5,296 per ounce—just 2% shy of its record closing high at the end of January.
Silver staged a dramatic “phoenix-like” rebound from its historic crash at the end of January, soaring 19% in February—the tenth consecutive month of gains.
Copper rose modestly over 1% in February, remaining within 3% of its all-time high and continuing to support hard-asset buying interest.
The logic behind precious metals’ rally:
- Stubborn inflation: The PPI shock confirms inflation is far from over, boosting safe-haven demand.
- Weaker dollar: Despite elevated inflation, the U.S. Dollar Index weakened amid trade tensions and the Supreme Court overturning tariffs.
- Geopolitical tension: U.S.-Iran nuclear talks have stalled, and Trump warned Iran “time is running out.”
- Cracks in credit markets: Contagion fears spread across the private credit market, driving capital into gold and Treasury bonds for safety.
Today’s Summary: The Inflation Ghost Returns; AI Faith Begins to Waver
February 28 marked a bleak conclusion to the first two months of 2026.
January’s PPI shock—core PPI up 0.8%, 2.7x expectations—shattered rate-cut hopes entirely: the probability of a June cut plunged from 85% to 57%.
The Nasdaq fell over 3% in February—the worst monthly performance since March last year. The iShares U.S. Technology Software ETF fell nearly 10% for the month and is down 23% year-to-date. The Magnificent Seven collectively stumbled—only Dell surged 22%, buoyed by its $43 billion AI server backlog, standing alone as the lone hero amid the rubble.
Block announced 50% layoffs; CoreWeave plunged 20%; financial stocks collapsed amid panic over private credit—sparking simultaneous anxiety over “AI replacing jobs” and contagion fears across credit markets.
Bitcoin broke below $66,000; Ethereum fell below $2,000; crypto markets declined in unison with broader risk assets.
Gold surged to $5,296; silver soared 19% in February—safe-haven sentiment propelled precious metals back to elevated levels.
Markets are asking one question: Is inflation merely a temporary flare-up—or is it making a full-blown comeback?
If the latter proves true, then not only will the Fed refrain from cutting rates—it may even be forced to hike again. That scenario would spell nightmare conditions for richly valued tech stocks, highly leveraged cryptocurrencies, and liquidity-dependent risk assets.
Dell’s $43 billion backlog proves AI demand is real—but markets no longer believe the “AI story” unconditionally. They now demand proof: profits, ROI, and evidence that the $700 billion in cloud giants’ capex can truly translate into shareholder returns.
February is over—but the inflation nightmare has only just begun.
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