Economic Trends and Technological Development: February Market Review

Introduction

In February, the U.S. manufacturing sector showed signs of recovery for two consecutive months, raising market concerns about rising inflation. At the same time, the artificial intelligence field continues to develop rapidly, with OpenAI's text-to-video model Sora sparking widespread discussion, and NVIDIA's earnings report exceeding expectations, making it the third largest company by market capitalization in the U.S. stock market for a time. The cryptocurrency market experienced a strong rise during the Spring Festival, with Bitcoin prices breaking through the $61,000 mark, and the positive impact of ETFs on the market beginning to manifest.

US Economy: Inflation Pressure Resurfaces

In early February, data released by the U.S. Department of Labor showed that non-farm employment increased by 353,000 in January, marking the largest increase since January 2023, far exceeding the expected 185,000. This data has raised market concerns about rising inflation.

The subsequently released CPI data further confirmed these concerns. In January, the CPI increased by 3.1% year-on-year and by 0.3% month-on-month, both exceeding market expectations. The core CPI rose by 3.9% year-on-year and by 0.4% month-on-month, also surpassing expectations. These data caused market fluctuations, with the Nasdaq index falling by 1.8% on the same day, and the yield on the ten-year U.S. Treasury bond rising sharply.

The U.S. manufacturing sector is also showing signs of recovery. The preliminary Markit Manufacturing PMI for February is 51.5, higher than the expected 50.5 and the previous value of 50.7, marking the first time since September 2022 that it has remained above the neutral line for two consecutive months. The number of manufacturing orders has reached a new high since June 2022, indicating that the U.S. may be entering a new round of inventory cycles, driving employment and inflation up.

Nevertheless, the market generally believes that the likelihood of the Federal Reserve continuing to raise interest rates is low. Currently, the first expected rate cut may be delayed until June, and Goldman Sachs has also adjusted its forecast for the number of rate cuts this year from five to four.

Artificial Intelligence: Technological Breakthroughs and Market Performance

The video generation tool Sora released by OpenAI has sparked heated discussions on the internet. The multiple one-minute videos generated by Sora showcase high-quality visuals, smoothness, and logical coherence, which are seen as heralding a significant transformation in the fields of content creation and media. This breakthrough has come much earlier than most people expected, reflecting the rapid pace of AI technology development.

NVIDIA's latest financial report data also confirms the booming development of the AI industry. The company reported a revenue of $22.1 billion in the fourth quarter, a year-on-year increase of 265%, and a net profit of $12.3 billion, a year-on-year increase of 769%. These figures significantly exceeded market expectations. As a result, NVIDIA's stock price surged, briefly becoming the third largest company by market capitalization in the U.S. stock market, behind only Microsoft and Apple.

It is worth noting that the preference of the younger generation of investors for technology stocks is becoming increasingly evident. Data shows that American teenagers (ages 13-19) prefer technology stocks represented by the "Big Seven." This trend suggests that, driven by AI technology, tech giants and "new assets" such as crypto assets may become mainstream investment varieties in the long term.

Cryptocurrency Market: Strong Performance During Spring Festival

During the Spring Festival, the price of Bitcoin surged significantly. Starting from around $43,000 on February 8, the price skyrocketed to over $53,000 within a week, an increase of more than 23%. On February 28, Bitcoin continued to climb, reaching a peak of around $61,000.

This wave of increase is mainly benefited from two factors: the reduction of Grayscale's selling pressure and the continuous inflow of funds into Bitcoin spot ETFs. Although Grayscale is still reducing its holdings, the pace of reduction has been marginally decreasing. At the same time, ETFs have been continuously injecting large amounts into Bitcoin. As of the 26th, 11 ETFs have cumulatively net inflows of $6.15 billion, with the market value of holdings accounting for 3.81% of Bitcoin's total market value.

In addition to ETFs, institutions like MicroStrategy are also continuously buying Bitcoin. From February 15 to 25, MicroStrategy purchased 3,000 Bitcoins at an average price of $51,813.

The market is paying attention to the potential launch of a spot Ethereum ETF. Currently, the most critical date is May 23, the date when the U.S. Securities and Exchange Commission will make a final decision on VanEck's Ethereum ETF. If the Ethereum ETF is approved, it will bring new sources of funding and opportunities to the crypto market.

Conclusion

Despite a rebound in inflation, the market remains strong, driven by innovations in AI technology. Currently, the market is more focused on the timing of the first interest rate cut rather than the possibility of continued rate hikes. The successful launch of the Bitcoin ETF has injected new vitality into the market, with investors eagerly anticipating whether Bitcoin can break its historical high of $69,000. As technological innovations and market conditions continue to evolve, the future investment landscape may undergo significant changes.