Risk-Off Mood Deepens as Credit Fears and Geopolitics Weigh on Stocks

Stocks closed lower Friday, capping a volatile and mostly negative February as investors grappled with hotter-than-expected wholesale inflation, rising geopolitical tensions in the Middle East, and renewed anxiety around private credit and AI-driven disruption. Treasuries rallied into month-end, oil surged on supply concerns, gold hit fresh highs, and crypto assets sold off as traders rotated toward safety. Despite the turbulence, the broader equity pullback remained relatively contained, underscoring a market still searching for direction rather than signaling a decisive break lower.

Key Headlines & Market Movers:

Hot Producer Price Data Clouds Inflation Outlook: January producer prices rose more than expected, reinforcing concerns that inflation pressures remain sticky and complicating the Federal Reserve’s path toward easing. While bond yields ultimately fell as investors sought safety, the data added to equity volatility, particularly in rate-sensitive and cyclical sectors, as markets recalibrated expectations for policy patience.

Private Credit and AI Bubble Concerns Resurface: Unease spread through financials and tech-linked names as stress in private credit drew attention following markdowns and dividend cuts at funds tied to firms including Apollo Global Management and BlackRock. At the same time, OpenAI announced a massive capital raise backed by investors such as Amazon and Nvidia, reviving debate over AI valuations even as companies continue to commit significant capital to the buildout.

• Corporate Divergence Highlights Selectivity: Earnings reactions were sharp and highly idiosyncratic, with strength in names like Dell Technologies and Block Inc. contrasting with steep declines in firms such as CoreWeave. In media, Netflix surged after stepping aside in a bidding battle with Paramount over Warner Bros, underscoring how deal activity and capital discipline are driving stock-specific outcomes even as the broader tape softens.

S&P 500 Sector Performance

Leaders

Looking Ahead

Investors will continue to monitor developments in the Middle East, signs of stress in private credit markets, and any follow-through from inflation data that could shift expectations for Fed policy. With equities only modestly lower for the month despite significant unease, the key question is whether tightening financial conditions and geopolitical risk evolve into something more systemic or remain episodic volatility within a still-resilient economic backdrop.

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