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

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

Author: Deep Tide TechFlow

US Stocks: PPI Surges, Sparks Panic, February Ends Weakly

On Friday, a single number shattered all market illusions.

The US January Producer Price Index (PPI) 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 this week to decline. On the last trading day of February, all three major indices closed in the red: the Nasdaq fell over 3% for the month, marking its worst monthly performance since March last year; the S&P 500 declined nearly 1%; the Dow barely maintained a 0.2% monthly gain.

The blow from inflation data has completely shattered expectations of rate cuts.

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

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

Divergence intensifies: defensive sectors soar, tech stocks collapse

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

Defensive sectors led the rally:

• Utilities (XLU) surged 10% in the month, the best monthly performance since 2003
• Consumer Staples (XLP) rose 8%
• Energy (XLE) up 24% year-to-date, continuing to lead

Tech stocks all collapsed:

• Communication Services (XLC), Technology (XLK), and Consumer Discretionary (XLY), the three major tech-heavy sectors, fell 2-4% in February
• iShares Software ETF (IGV) plummeted nearly 10% in February, down 23% year-to-date
• Financials (XLF) lagged at the bottom

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 is circulating: “Sector rotation is the lifeblood of a bull market.” Over the past month, the S&P 500 equal-weighted index (SPXEW) gained 2.64%, while the S&P 500 declined 0.6%, and the Nasdaq 100 fell 2.6%.

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

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

This marks another “AI revaluation” moment for Dell after a 32% surge in February 2024.

The earnings figures are shocking:

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; FY2026 cumulative AI server orders exceeding $64 billion; AI server backlog at quarter-end 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 FY2027, we hold a record backlog of $43 billion—powerful proof that our engineering leadership and differentiated AI solutions are winning.”

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

Nvidia’s perfect earnings report caused a 5.5% drop, while Dell’s perfect report led to a 22% surge—both AI, yet their fates are so different.

The answer may be: Dell’s backlog ($43 billion) provides market “visibility,” while Nvidia’s $78 billion guidance 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 fell 1.97% to $65,864, briefly dropping below the $66,000 mark during the day. Ethereum plummeted 4.39% to $1,930, losing the $2,000 psychological level. Solana dropped 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. After Nvidia’s earnings, Nasdaq declined, 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 broad turn to red on Friday morning, indicating most selling happened overnight, with buyers quietly returning at these levels.

But macro conditions remain tough: January PPI exploded, rate cut expectations further delayed; credit spreads widened, private equity firms plunged, credit stress fears intensify; 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 surged $102 (+1.97%) to $5,296 per ounce, just 2% below its historic February close high at the end of January. Silver rebounded from its historic plunge at the end of January, soaring 19% in February, marking 10 consecutive months of gains.

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

The logic behind the precious metals rally:

1. Persistent inflation: Explosive PPI indicates inflation is far from over, boosting safe-haven demand
2. Weakening dollar: Despite high inflation, the dollar index weakened due to trade tensions and Supreme Court rulings overturning tariffs
3. Geopolitical tensions: US-Iran nuclear talks deadlocked, Trump warns Iran “time is running out”
4. Credit market cracks: Panic spreads in private credit markets, funds flow into gold and government bonds for safety

Today’s summary: Inflation ghost returns, AI faith begins to waver

February 28 marks a bleak end to the first two months of 2026.

January’s 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 fell over 3% in February, its worst month since March last year. iShares Software ETF dropped 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 soared to $5,296, silver surged 19% in February, driven by safe-haven sentiment.

The market is asking: Is inflation a temporary rebound or a return with force?

If the latter, the Fed will not only refrain from cutting rates but may be forced to hike again. That 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 inflation nightmare has just begun.