All markets surge early this morning! The Federal Reserve has made a major announcement!

Full-Scale Counterattack!

As market trading sentiment gradually steadied, the overnight U.S. stock market staged an all-round rally. Technology stocks surged across the board, with the Nasdaq up more than 1%. Most large U.S. “Chinese concept” stocks rose. European equities also closed higher across the board. Analysts said that the latest remarks from U.S. President Trump and U.S. Treasury Secretary Bessent eased investors’ concerns about the crude oil market. The overnight VIX, the fear index, fell sharply by more than 10%.

In addition, the Federal Reserve’s rate-cut path is also a key focus for the market. In the early hours of March 5 Beijing time, the latest edition of the Federal Reserve’s Survey of Economic Conditions in the United States (known as the “Beige Book”) showed that, overall, the U.S. economic outlook is optimistic, and most regions expect the economy to see small to moderate growth over the coming months. However, the “Beige Book” warned that in many jurisdictions, economic uncertainty has increased, price sensitivity has risen, and low-income consumers are cutting spending, which has suppressed sales performance.

Full-Scale Counterattack

On March 4, U.S. Eastern Time, all three major U.S. stock indexes closed higher together, led by a rebound in technology stocks. By the close, the Dow rose 0.49%, the Nasdaq rose 1.29%, and the S&P 500 index rose 0.78%.

Most large-cap U.S. technology stocks closed higher. Micron Technology and AMD jumped more than 5%; Amazon and Tesla surged more than 3%; Meta rose nearly 2%; Nvidia and Broadcom rose more than 1%; and Microsoft closed slightly higher. Apple and Google closed slightly lower.

Popular Chinese concept stocks strengthened across the board. The Nasdaq China Golden Dragon Index rose 0.8%, NIO surged 5.5%, and Xiaopeng Intelligent, plus Weilai? Wait—“小马智行” is Pony.ai (Chinese). “文远知行” is WeRide. They both jumped more than 4%. New Oriental rose more than 2%. XPeng Motors and NetEase rose more than 1%.

European equities also closed higher across the board. Spain’s IBEX35 index closed up more than 2%, Italy’s FTSE MIB index rose nearly 2%, and the STOXX 50 index and Germany’s DAX30 index rose more than 1%.

On the news front, the Trump administration pledged to stabilize the crude oil market, which to some extent eased investors’ worries about the Middle East conflict.

Money flowed back into the technology sector, pushing the Nasdaq higher and recouping all of its losses since the U.S. launched an attack on Iran and reignited tensions in the Middle East. The S&P 500 index was also nearing its all-time high closing level set in January.

Jim Awad, Senior Managing Director at Clearstead Advisors, said the White House statement reduced market concerns that the crude oil market could face major supply disruptions. As risk perceptions eased and confidence strengthened, investors were prompted to buy back technology stocks they had previously sold off heavily in February—stocks whose valuations are more attractive than they were just a few weeks earlier.

Awad said this combination of factors brought a degree of optimism to the market, but the coming weeks will still be a test. What’s needed now is to stay rational—neither overly bullish nor overly bearish.

Also, several strong economic data releases on Wednesday boosted investors’ sentiment. First, the ADP report showed that U.S. February ADP employment data rebounded more than expected. New jobs totaled 63k, above the market expectation of 50k, and also a sharp rebound from the prior value of 22k. The U.S. non-manufacturing sector also recorded growth that came in better than expected last month, and inflation pressures eased somewhat.

Richard Bernstein, CEO of Richard Bernstein Advisors, said that if the market believes this war will be short-term or has limited impact on the U.S. economy, the stock market is likely to keep rebounding. Conversely, if the conflict drags on and creates a substantial shock to the U.S. economy, market volatility could further intensify.

Federal Reserve’s Major Report Released

In the early hours of March 5 Beijing time, the Federal Reserve released the latest “Beige Book,” which showed that in recent weeks, economic activity in most parts of the United States has grown at a slight to moderate pace. However, an increasing number of regions reported that economic activity was flat or declining. Overall, seven of the twelve Federal Reserve districts saw growth at a slight to moderate pace, while the number of districts reporting flat or falling activity increased from four in the previous report to five in the current one.

The Federal Reserve’s “Beige Book” summarizes the results of fact-finding assessments by 12 regional Federal Reserve banks covering the economic situation across the United States. This report is an important reference document for meetings of the Federal Reserve’s monetary policy committee. Federal Reserve officials will hold the next interest rate meeting on June 17 to 18.

Compiled by the Cleveland Fed based on information available as of February 23, the timing came before the period of the U.S. attack on Iran, which reignited Middle East tensions and drove oil prices soaring.

The Federal Reserve said that although consumer spending increased slightly overall, two Federal Reserve districts reported ongoing declines. In many jurisdictions, economic uncertainty has intensified, price sensitivity has increased, and low-income consumers have cut spending, suppressing sales performance. Reserve districts affected by winter storms reported that retail foot traffic generally slowed. One Federal Reserve district said that immigration enforcement activities had a negative impact on customer demand in urban areas.

The “Beige Book” said that employment levels remained broadly stable, even as businesses sought to use artificial intelligence to improve efficiency. In some districts and across multiple industries, companies began adopting artificial intelligence or other forms of automation to boost efficiency. Most companies emphasized that the goal is to improve productivity rather than replace employees.

The “Beige Book” showed that among the 12 Federal Reserve districts, 8 reported inflation at a moderate level. Overall, firms expect the pace of price increases in the near term to slow somewhat. In most regions, companies said wages are rising at a moderate or reasonable pace. At the same time, some regions also reported that overall compensation faces upward pressure due to rising medical insurance costs.

The U.S. Department of Labor will release February’s nonfarm employment report on Friday this week, and officials will also receive the latest inflation data next week. Federal Reserve policymakers will meet again in Washington on March 17 to 18.

According to CME’s “FedWatch,” as of the time of publication, the probability that the Federal Reserve will cut rates by 25 basis points by March is 2.7%, while the probability of keeping rates unchanged is 97.3%. The probability that the Federal Reserve will cut rates by a cumulative 25 basis points by April is 12.5%.