New York Stock Market Amid War and AI Fears: How Far Will It Shake?

On February 28, all three major U.S. stock indexes fell. The Dow Jones Industrial Average dropped 1.05%, the S&P 500 declined 0.43% to close at 6,878.88, and the Nasdaq slid 0.92%, marking its worst February in a year. Financial and software stocks were particularly weak, leading the market correction.

On the economic front, January’s producer prices and services inflation came in stronger than expected, signaling that tariff costs are being passed on to distribution and service prices. As a result, the CME FedWatch Tool now shows less than a 10% probability of a Federal Reserve rate cut in March, and markets have scaled back expectations to roughly three cuts this year.

At the individual stock level, bank shares took a hit after the bankruptcy of U.K. mortgage lender MFS raised concerns over global banks’ credit exposure, sending the KBW Bank Index down more than 4% in a single day. Meanwhile, fintech firm Block announced plans to cut about 40% of its workforce as part of its AI integration, fueling fears that artificial intelligence could encroach on traditional software and fintech businesses and triggering a broad selloff in growth stocks.

Globally, U.S. and Israeli strikes on Iran and the threat of a Strait of Hormuz blockade drove Brent crude prices up over 10% intraday, redirecting capital into safe-haven assets such as gold and U.S. Treasuries. The surge in oil prices—compounding already high inflation and limiting the Fed’s easing room—has brought U.S. markets into a phase of structural volatility driven by war risk, AI-driven market shifts, and credit concerns. In the near term, managing heavy exposure to AI and big tech, leverage, and sector-specific risks in financials and energy is crucial for all investors.