Stocks were caught up Friday in a whirlwind of market-moving headlines, making for a wild final trading day in a rough month for U.S. equities.

The penultimate day of February saw President Trump signal that the U.S. military remains ready to strike Iran. There also were more problems on the inflation and private-credit fronts, with shares of financial stocks - banks and asset managers alike - selling off hard.

Investors largely blamed the collapse of U.K.-based mortgage lender Market Financial Solutions for reviving fears about more "cockroaches" to come in the private-credit industry. But there was also an announcement from Apollo Global Management $(APO)$ that it had reduced a dividend at a private-credit fund and re-evaluated some asset values due to challenges with its loan portfolio.

The KBW Nasdaq Bank Index BKX fell nearly 5% to cap off the month. Shares of Blue Owl Capital $(OWL)$ fell nearly 6%, while Apollo's stock was down more than 8%, FactSet data showed. Blue Owl spooked investors earlier in February when it limited investor withdrawals and sold $1.4 billion in private-credit assets, including some software loans.

Other issues for investors arrived ahead of the opening bell, including a troubling inflation report that showed wholesale prices rose by 0.5% in January - faster than the 0.3% increase economists had expected. Meanwhile, what some have called the artificial-intelligence "fear trade" remained in full effect.

"Investors are readjusting their risk budget right now in a risk-off mood on Friday, and that the AI momentum is now becoming AI anxiety," said Brian Mulberry, chief market strategist at Zacks Investment Management.

A 'shoot first, ask questions later' market

Software stocks and megacap technology players like Nvidia (NVDA) continued to struggle on Friday, adding to their already punishing losses over the past month. This time, semiconductor stocks - particularly highflying memory names like Sandisk $(SNDK)$ and Micron Technology $(MU)$, which have soared recently while software has plunged - joined in the selling as well.

Stocks trading outside of the U.S. mostly continued to trundle higher in February, with big gains particularly in the South Korean market. But in the U.S., a dour mood has been underscored by a couple of apparent contradictions, as Jay Hatfield, a portfolio manager at Infrastructure Capital Advisors, pointed out during a conversation with MarketWatch.

First, sentiment in certain corners of the market has soured dramatically, even though the S&P 500 SPX finished Friday roughly 2 percentage points shy of record territory. Second, there are seemingly contradictory narratives causing havoc within the technology sector, the largest and most important sector for the U.S. equity market's overall stability.

Megacap tech stocks are struggling as investors balk at the massive spending on AI infrastructure, seemingly worried about the possibility that the return on investment might be too weak to justify the tremendous cost. Recent earnings reports from Microsoft $(MSFT)$ and Amazon.com (AMZN) elicited negative reactions from investors, while even blockbuster earnings from Nvidia earlier this week weren't enough to turn the tide.

Meanwhile, fears that AI might be so successful it turns whole industries on their heads have hammered shares of software companies, asset managers, commercial real-estate and brokerage firms, cybersecurity companies, and even transportation and logistics firms.

"These ideas don't even make sense internally - but they're all out there, and all of these companies are going down," Hatfield told MarketWatch Friday. "This is a 'shoot first, ask questions later' kind of market."

A Substack post penned by Citrini Research that went viral Monday was widely credited with inspiring the worst selloff in stocks in three weeks. The report envisioned an economy in 2028 where AI is successful enough to cause widespread white-collar job destruction, without new industries emerging to absorb displaced workers.

"AI has been disrupting a different segment of the economy on a daily basis," said Michael Hans, chief investment officer at Citizens Wealth, in a phone interview Friday. He noted that "the narrative has been shifting" away from talk of huge productivity gains from AI to worries over potential job losses and damage to the economy.

A puzzling bid for bonds

There also has been a sudden bid for bonds. Instead of Treasury yields rising on signs that inflation might be rearing back up, the benchmark 10-year rate BX:TMUBMUSD10Y slipped below the 4% threshold on Friday.

Inflation can be kryptonite for bonds. But lately, inflation and the timing of any future Federal Reserve interest-rate cuts have taken a backseat to investors seeking safety from the selloff in software names, said Sweta Singh, a portfolio manager at City Different Investments.

"It's the legacy [software-as-a-service] scared money that is being parked into the Treasury market," Singh told MarketWatch.

This dynamic has also helped bonds shrug off the Supreme Court's decision to rule most of President Trump's tariffs illegal, Singh noted. The ruling raised new questions about the size of U.S. fiscal deficits.

In other haven plays, the U.S. dollar DXY failed to gain ground Friday against a basket of rival currencies, despite Trump saying he would "love not to" attack Iran. Yet gold (GC00,) which global central banks have been stockpiling as a dollar alternative, has been playing second fiddle to silver (SI00) as investors grow more nervous about a splintering world order. Both metals saw their largest monthly gains on record in February, Dow Jones Market Data showed.

A "panic" rotation has also helped boost shares of defensive stocks in the consumer-staples sector. Investors trawling for value stocks have also boosted shares of energy and materials names.

Both the S&P 500 and the Nasdaq Composite COMP finished in the red on Friday, and both indexes capped off their worst monthly drop since March 2025, according to Dow Jones Market Data. The tech-heavy Nasdaq has now fallen during three of the past four months.

Yet it wasn't all bad news. The blue-chip Dow Jones Industrial Average DJIA managed to eke out a gain for the month - taking its winning streak to 10 months, its longest such run since January 2018.