US shares fell on Friday, with the Dow Jones Industrial Average down 600 points (1.15%) and back below 49,000. The S&P 500 dropped about 0.7% and the Nasdaq Composite lost roughly 0.9%, leaving all three indices down for February amid inflation data, AI-related concerns and technology profit-taking.
The BLS said January PPI rose 0.5% month-on-month versus a 0.3% estimate, after a revised 0.4% rise in December. Core PPI rose 0.8% versus 0.3%, with headline PPI at 2.9% year-on-year and core at 3.6%; trade services margins rose 2.5%, and core PCE estimates reached up to 0.5%.
Fed Expectations Shift
CME FedWatch showed pricing for about two 25-basis-point cuts in 2026, while the March 17–18 meeting was expected to hold at 3.50%–3.75%. Block surged over 23% after announcing cuts of more than 4K staff, moving headcount from over 10K to just under 6K, alongside adjusted EPS of $0.65 on $6.25 billion revenue and $2.87 billion gross profit (+24%), including Cash App gross profit up 33%.
Dell rose 17.5% to about $142 after $33.4 billion revenue versus $31.41 billion consensus and 39% year-on-year sales growth, plus $64 billion in AI server orders and $50 billion fiscal 2027 AI server revenue guidance. Nvidia fell 2.5% after a 5.5% drop, CoreWeave fell about 12% with a $66.8 billion backlog, Netflix rose about 9% after passing on a $31-per-share bid context, and IGV fell over 10% in February while gold was near $5,192 per ounce for a seventh monthly gain.
With January’s hot PPI report pushing core inflation to 3.6%, the odds of aggressive Fed rate cuts are fading fast. We have seen the market rapidly reprice expectations, moving from anticipating over four cuts late last year to now pricing in just two for all of 2026. Derivative traders may want to consider puts on rate-sensitive ETFs or buying VIX calls ahead of the March 18th Fed decision, as uncertainty remains elevated.
The clear divergence within the technology sector presents a compelling opportunity for pair trades. We are seeing sustained weakness in legacy software names, suggesting traders could use put options on the IGV software ETF to speculate on further downside from its 10% drop in February. Simultaneously, the strength in Dell on the back of its $64 billion in AI server orders suggests call options on specific hardware winners may be the more precise trade, especially as leader Nvidia shows signs of weakness.
Block’s 23% surge after announcing AI-driven layoffs is a major signal that the market is now rewarding aggressive cost-cutting under the guise of efficiency. This is reminiscent of the “year of efficiency” playbook we saw companies run successfully back in 2023, where Meta’s stock soared over 190% after similar actions. Traders should watch for similar announcements from other tech companies with high headcounts, potentially using long-dated call options to position for similar positive reactions.
Positioning For Volatility
The steady climb in gold, now near $5,200 an ounce for its seventh straight monthly gain, reflects a growing unease in the market. This flight to safety, combined with the Dow’s 600-point drop, signals that broader market volatility is likely to persist. For traders, this could mean it is a good time to buy call options on gold miners via the GDX ETF or to use straddles on the S&P 500 to play an increase in price swings in either direction.
