Stocks & Software Soar, Oil Snores As Traders Forget About The War

Coming into today, there was tangible dread on trading desks: after all, Asia was a bloodbath, Europe was red, and Korea's Kospi had just suffered it's biggest 1- (and 2-) day drop on record, tumbling 12% on Wednesday and briefly entering a bear market from its record high just 3 days ago.

Yet for the third day in a row, what started off as an overnight rout, quickly turned into a broad, risk-on buying buying spree.

The first trigger was a (since denied) NYT report that Iran was trying to backchannel with the CIA. Then, it was solid economic data, but perhaps the biggest trigger for today's upside was extremely bearish positioning and... the fact that there simply wasn't a barrage of bad data headlines. 

Remarkably, thanks to the third meltup in a row, stocks are back to Friday’s pre-Iran strike close, and as Goldman writes in its mid-day wrap, "if you haven’t been in the seat the last 2 days you might have a “nothing to see here” feeling." And while macro is still driving much of the activity today, volumes in the already extremely illiquid market have moderated vs yesterday but ETFs are still nearly 40% of the tape (which, as a reminder, is how most hedge funds, well, hedge these days).

And while the market glossed over news that Kurds may be getting involved in the Iran war, while the Houthis are preparing to attack targets inside Saudi Arabia, it appeared more interested in the latest economic news which were impressive, starting with the solid ADP and ending with the blowout Service ISM number. 

 The ADP number was the day's first positive surprise, as private jobs surged 3x from January and beat estimates, as they rose to 63K, the highest since November.

Then it was the Service ISM print which smashed expectations (a 6-sigma beat), rising the most since Sept 2024 to the highest level since July 2022.

The stagflation narrative was crushed, if only for today, as the ISM's Prices Paid index tumbled to an 11 month low while everything else rose. 

The Citi US eco surprise index jumped from 30 to 39 in one session following the unexpectedly strong economic data. 

A look under the surface reveals a solid picture, as if taken during the market's 2025 heyday: tech, discretionary and utilities are leading, while energy, materials and staples lag, with a healthy 310 names higher, 190 names lower. 

As we warned on several occasions, the Energy sector had fully priced in the war - and then some - and not even today's latest escalation was enough to push up the space; as a result energy was the worst sector. 

Going back to the Goldman note, they write that what is interesting to see is the highest velocity barbells are reversing their trends to start the year: as noted above, the KOSPI had its worst session ever after the blistering start to the year while Bitcoin is dusting itself off +8% and helping drive the cover bid to the market (more on that in a second). Bitcoin is also the reason momentum trying - and succeeding - to recover from its 5th worst decline over the last year yesterday. In fact, today's 9% jump is the best since Liberation day (excluding the Feb 6, 2-day roller coaster which ended up flat),

Moving on: the market may have forgotten for now the whole debate about whether AI will end the world, but it appears to remember that Anthropic is suddenly in the administration's cross hairs (damage control reports of soaring revenue notwithstanding). And as we previewed a week ago when we said that the showdown between the DOD and Anthropic would results in a software surge... 

WarAI: Will Anthropic's Clash With Hegseth Trigger Historic Software Short-Squeeze https://t.co/HTp8VTbQxl

— zerohedge (@zerohedge) February 26, 2026

... now that fears of a Claude-driven disruption are fading, software (IGV) is up every day since our post - and up 6 of the past 7 days.

The rebound in software means that after dropping to a record low on Feb 23, the GS TMT Software vs Semis pair has continued to rise and may have finally established a bottom after years of falling.

As Goldman's tech strategist Peter Callahan writes, "Software x Semis .. one of a handful days this year where Semis and Software are both up 1.5%+ on the day .. ‘squeeze’ in the latter, ‘bounce’ in the former? … the ‘consensus’ view in Software right now remains that the group can “bounce” (positioning rate of change), but may be harder to “rally” (medium term debates exist)."

It's not just software: after plunging yesterday the Goldman High beta momentum basket surged today, erasing most of yesterday's losses and also trading above Friday's levels, and not far from January's record highs. 

Confirming the rebound in momentum, the Goldman retail favorites basket had its best day in a month, although it remains in a tight range, trading at levels last seen in late September.

Even the badly beaten down private credit names halted their decline, and posted modest gains on Wednesday.

While it may not seem like it, today's broad stock market bounce is an extension of some of the activity observed by Goldman's Prime Brokerage yesterday: they saw buying across all regions yesterday, including in Korea. US buying was mostly driven by short covering in macro products...sector flows net flat, with buying in most sectors offset by heavy selling in Energy 

• Global Book was net bought (+1.3 SDs one-year) driven by long buying.  
• US was net bought (+0.9 SDs one-year) driven by short covering and long buying in 1.6 to 1 ratio. Net buying was driven by net buying in Macro Products (+1.2 SDs one-year, short covers>long buys).  
• 8/11 US sectors were net bought led by Health Care (+1.6 SDs, long buys>short covers), Utilities (+2.9 SDs, long buys>short sells), Information Technology (+0.5 SDs, short covers>long buys) and Communication Services (+1.1 SDs, short covers>long sells) while Energy (-5.3 SDs, short sells>long sells) was by far the most net sold sector. 

As for today, Goldman writes in its mid-day update that overall activity levels are slightly higher vs. the trailing two weeks (which were marked by investor paralysis), as market volumes are +16% vs the 20DMA.

• Goldman's floor tilts +5% better to buy as both HFs and LOs are on the bid. Cyclical demand sticks out – Disc, Fins and Industrial buy skews are all in the 90th+ %-ile.
• HFs are +8% better to buy, that’s 95th %-ile.  Demand is skewed towards Tech, Indust & Fins with supply concentrated in Macro Prods.
• LOs are +7% better to buy with demand for Tech, Cons and HCare outweighing supply in Macro Prods and Comm Svcs.

Going back to what we said above that the market may have forgotten about the AI capex scare, that isn't exactly true: Goldman's tech analysts point out that the recent anxiety about tech valuations, capex plans and the disruption to business models (particularly in areas around software) has resulted in a de-rating of longer-duration cash flows in favor of more certain nearer-term returns in physical capex and infrastructure. This has led to one of the weakest periods of relative returns for technology compared with other sectors over the past 50 years!

But what is perhaps most remarkable about today's action is that oil, which was seemingly surging in a relentless meltup in the past few days, closed flat from Tuesday's close.

One final point: we have previously observed that the October surge in the Kospi coincided with the meltdown in bitcoin, starting just around the time of the infamous 10/10 meltdown in crypto.

Well, as we said a few days ago when we predicted that the meltdown in the momentum-darling Kospi would lead to a jump in beaten down and deserted bitcoin... that's precisely what happened!

Putting it all together, despite the ongoing corrections in Asia (Korea, Japan, Taiwan), not to mention the ongoing war in the Gulf, the S&P500 is basically now Flat since last Thursday before the war started, and taking the geopolitical + cross asset volatility in stride .. for now.

The question now is what can the newsflow firehose throw at the market to surprise it and restart the scare cycle from scratch.