Market Overview for February 28: Inflation Nightmare Repeats, Defensive Sectors Surge, Tech Stocks Collapse

Author: Deep Tide TechFlow

US Stocks: Surging PPI Sparks Panic, Disappointing February Close

On Friday, a single data point shattered all market illusions.

The US Producer Price Index (PPI) for January soared 0.5% month-over-month (expected 0.3%), with core PPI skyrocketing 0.8% (expected 0.3%), which is 2.7 times the forecast.

The market instantly collapsed.

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

This is the third trading day of decline this week. On the last trading day of February, the three major indices all closed in the red: the Nasdaq down over 3%, marking the worst monthly performance since March last year; the S&P 500 down nearly 1%; the Dow barely managed a 0.2% monthly gain.

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

The probability of a rate cut in March by the Federal Reserve dropped from 10% to 5%, in April from 30% to 18%, and in June from 85% to 57%. The market is beginning to price in “fewer and later rate cuts,” and some are even worried that if inflation remains stubborn, the Fed might raise rates again.

Schwab Chief Fixed Income Strategist Collin Martin bluntly stated: “Inflation still dominates monetary policy. Given that the labor market has stabilized, inflation data will be the key factor in determining the Fed’s future meetings.”

Divergence intensifies: Defensive sectors soar, tech stocks collapse

February’s market told a story of a “big rotation.”

Defensive sectors led the rally:

Utilities (XLU) surged 10% in a single month, the best monthly performance since 2003.

Consumer Staples (XLP) rose 8%.

Energy (XLE) has gained 24% year-to-date, continuing to lead.

Tech stocks all suffered:

Communication Services (XLC), Technology (XLK), and Consumer Discretionary (XLY), the three major tech-heavy sectors, declined 2-4% in February.

iShares Technology Software ETF (IGV) plummeted nearly 10% in February, down 23% year-to-date.

Financials (XLF) lagged behind.

“The Big Seven” giants all faltered. Except for Apple, which barely broke even, the rest declined: Amazon down nearly 1%, Microsoft and Meta down over 2% and 1%, respectively.

Market legend Ralph Acampora’s famous quote: “Sector rotation is the lifeline of a bull market.” Over the past month, the equal-weighted S&P 500 (SPXEW) rose 2.64%, while the S&P 500 declined 0.6%, and the Nasdaq 100 fell 2.6%.

Amid the ruins, Dell proved that AI demand is real with its earnings report.

On Friday, Dell soared 21.9% to $148, its biggest single-day gain in two years, with over 18 million shares traded—double the usual volume.

This marks Dell’s second “AI revaluation” moment after a 32% surge in February 2024.

The earnings figures are astonishing:

Q4 Fiscal Year 2026 (ending Jan 30):

Revenue of $33.4 billion, up 39% YoY, beating expectations by $4.6 billion; non-GAAP EPS of $3.89, up 45% YoY, beating expectations by 10%; AI server quarterly revenue of $9 billion, up 342% YoY; Infrastructure solutions revenue of $19.6 billion, up 73%.

Even crazier are the orders and backlog: Q4 AI server orders of $34.1 billion; total AI server orders for fiscal 2026 exceeding $64 billion; at quarter-end, AI server backlog of $43 billion.

Dell Vice Chairman Jeff Clarke: “Fiscal year 2026 is a pivotal year in our company’s history. The AI opportunity is transforming us. We have completed over $64 billion in AI server orders, shipped over $25 billion, and by the start of fiscal 2027, we hold a record backlog of $43 billion. This is strong evidence that our engineering leadership and differentiated AI solutions are winning.”

Dell’s surge sends a key signal to the market: AI infrastructure demand is real, but the market is selective in believing it.

Nvidia’s perfect earnings report caused a 5.5% drop, while Dell’s perfect report surged 22%. Both are AI, so why the stark difference?

The answer may be: Dell’s backlog ($43 billion) provides market “visibility,” whereas Nvidia’s guidance of $78 billion is seen as “overextending into the future.”

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

On Friday, the crypto market declined along with US stocks.

Bitcoin dropped 1.97% to $65,864, briefly falling below the $66,000 mark intraday. Ethereum plummeted 4.39% to $1,930, losing the $2,000 psychological level. Solana fell 4.13% to $82.13, Cardano down 2.82%, Dogecoin down 3.14%.

CoinDesk analyst Daniel Reis-Faria: “What you’re seeing now is Bitcoin trading in sync with broader risk markets. Nasdaq declined after Nvidia’s earnings, and cryptocurrencies followed suit. Bitcoin quickly approached $70,000, but when stock momentum stalls, those quick profits also retreat rapidly.”

This decline appears more like a leverage washout rather than a structural collapse. Hourly charts show a full reversal to red on Friday morning, indicating most selling happened overnight, with buyers quietly returning at these levels.

But the macro environment remains tough: January PPI exploded, rate cut expectations further delayed; credit spreads widened, private equity firms plunged, and credit stress fears intensified; Bitcoin is down about 24% year-to-date, halving from its October high of $126,186.

Gold and Silver: Safe-Haven Rally, Gold at $5,296, Silver Surges 19% in February

Gold soared $102 (+1.97%) to $5,296 per ounce, just 2% below its historic February close high.

Silver rebounded from a historic plunge at the end of January, surging 19% in February, marking 10 consecutive months of gains.

Copper prices rose slightly over 1% in February, just 3% below all-time highs, continuing to support hard asset buying.

The rationale for precious metals’ rebound:

Persistent inflation: Explosive PPI indicates inflation is far from over, boosting safe-haven demand.

Weakening dollar: Despite high inflation, the dollar index weakened due to trade tensions and the Supreme Court overturning tariffs.

Geopolitical tensions: US-Iran nuclear talks deadlocked, Trump warned Iran that “time is running out.”

Credit market cracks: Panic spreads in private credit markets, funds flow into gold and government bonds for safety.

Summary for today: Inflation ghost returns, AI faith begins to waver

On February 28, the market marked a bleak end to the first two months of 2026.

January PPI exploded, with core PPI soaring 0.8%, 2.7 times the forecast. Rate cut hopes are shattered, with June’s probability plunging from 85% to 57%.

Nasdaq down over 3% in February, the worst since March last year. iShares Tech Software ETF down nearly 10% in February, down 23% YTD. The “Big Seven” giants all faltered, with only Dell surging 22% on its $43 billion AI server backlog, becoming a lone hero amid the ruins.

Block laid off 50%, CoreWeave plunged 20%, financial stocks collapsed amid private credit panic—“AI replacing humans” anxiety and “credit contagion” fears spreading simultaneously.

Bitcoin broke below $66,000, Ethereum lost $2,000, and the crypto market declined along with risk assets.

Gold surged to $5,296, silver jumped 19% in February, safe-haven sentiment pushing precious metals back to high levels.

The market is asking: Is inflation a temporary rebound or a resurgence?

If the latter, the Fed will not only refrain from cutting rates but may be forced to raise them again. This would be a nightmare for high-valuation tech stocks, leveraged cryptocurrencies, and liquidity-dependent risk assets.

Dell’s $43 billion backlog proves AI demand is real, but the market no longer blindly believes in the “AI story”—it wants profits, ROI, and to see if the $7 trillion cloud giants’ capital expenditures can truly translate into shareholder returns.

February is over, but the nightmare of inflation has only just begun.