Weekly Market Brief | Week Ending February 21, 2026

A holiday-shortened week, but not a quiet one. Here's what the numbers actually said.

Equity Markets — Weekly Performance

• Nasdaq Composite: +1.5%
• S&P Mid Cap 400: +1.2%
• S&P 500: +1.1%
• Russell 2000: +0.7%
• Dow Jones Industrial Average: +0.3%

Notable: The S&P 500 closed above its 50-day moving average (6,894.93) on Friday — a technically significant threshold it had been flirting with all week. The Nasdaq snapped a five-week losing streak. Breadth was reasonably healthy, with 64% of S&P 500 members trading above their 200-day SMA as of Friday, per Bloomberg data cited by Charles Schwab.

Sector Rotation — Clear Risk-On Signal

Cyclicals led decisively while defensives gave back ground:

→ Communication Services: +2.7% | Energy: +1.7% | Industrials: +1.7% | Financials: +1.6% → Consumer Staples: -2.3% | Health Care: -0.6%

Within tech, the split continues — semiconductors (PHLX: +1.5%) and mega-cap names outperformed, while software-focused funds (iShares Expanded Tech-Software ETF: -2.4%) remained under pressure for the week. Investor caution around AI disruption to software revenue models hasn't dissipated yet.

The Macro Reality Check — GDP + PCE on the Same Day

Friday was unusual: due to the late-2025 government shutdown delaying BEA releases, Q4 GDP and December PCE were published simultaneously. The combination was not market-friendly at first glance.

Q4 2025 GDP — BEA Advance Estimate (Released Feb 20, 2026):

• Real GDP: +1.4% annualized (vs. Q3's +4.4%; consensus: ~3.0%)
• The government shutdown subtracted an estimated ~1.0 percentage point from headline growth
• Consumer spending rose 2.4%; private domestic demand (final sales) held at +2.4% — suggesting underlying demand remained solid
• Full-year 2025 GDP: +2.2% (vs. +2.8% in 2024)

December PCE — BEA Personal Income & Outlays (Released Feb 20, 2026):

• Headline PCE: +0.4% MoM (consensus: 0.3%) | Core PCE: +0.4% MoM (in line)
• Year-over-year headline PCE: +2.9% — running above the Fed's 2% target
• Personal Income: +0.3% | Personal Spending: +0.4% — spending outpaced income again
• Personal saving rate: 3.6%

The dual release confirmed the market's core tension: growth is soft (partly shutdown-distorted), but inflation isn't cooperating. A challenging signal for the Fed.

Labor Market — Still Resilient

Initial Jobless Claims (week ending Feb 14) — DOL Release, Feb 19, 2026:

• 206,000 (prior: 229,000 revised; consensus: 225,000)
• Continuing Claims: 1.869 million (week ending Feb 7)
• 4-week moving average: 219,000

Claims fell sharply after weather-related distortions in prior weeks. The DOL data reinforces the "low-firing, slow-hiring" dynamic that has characterized the labor market — resilient enough to keep the Fed cautious, but not strong enough to signal accelerating growth.

Fed Watch — Rate Cut Expectations Pushed Further Out

The January FOMC minutes (released Wednesday) carried a noticeably hawkish tone. Several participants indicated openness to rate increases if inflation persists above target. Current Fed Funds rate: 3.50%–3.75%.

Per CME FedWatch (as of Feb 20, 2026):

• March FOMC: ~94% probability of no change
• June 2026: First realistic window for a potential cut (~57% probability, per Schwab/Bloomberg data)

Market expectations shifted materially on the week — March cut probability dropped from ~10% to ~5%, and April slid from ~30% to ~18% (Schwab Weekly Outlook). The PCE print did the damage here.

Q4 2025 Earnings Scorecard — FactSet (as of Feb 13, 2026)

With 74% of S&P 500 companies having reported:

• EPS Beat Rate: 74% (10-year avg: 76%)
• Blended EPS Growth (YoY): 13.2% — 5th consecutive quarter of double-digit growth
• Revenue Growth: +9.0% YoY — highest in over three years (FactSet)
• Forward 12-month P/E: 21.5x (above 5-yr avg: 20.0x; 10-yr avg: 18.8x)
• CY 2026 EPS Growth Estimate: +14.4%

Earnings have been the ballast. Despite macro headwinds, corporate profitability is holding up — particularly in tech, industrials, and communication services.

Oil & Geopolitics

Crude Oil (WTI) closed Friday at $66.49/bbl, up from $62.33/bbl at the start of the week — a ~6% weekly gain. The move was driven by escalating U.S.-Iran tensions, with Washington Post reporting Thursday that the administration appears ready to authorize military action. Defense names responded: Lockheed Martin (+2.6%), Huntington Ingalls (+4.3%) on Thursday alone.

Tariff Wildcard

Friday's Supreme Court ruling against President Trump's IEEPA-based tariffs briefly sent trade-sensitive sectors sharply higher. The ruling suspended sweeping "reciprocal" tariffs, with estimates of up to $175 billion in potential refunds (per Trading Economics). However, the administration signaled intent to impose a 10% global tariff under Section 122 — capping the relief rally and keeping policy uncertainty elevated.

The market demonstrated resilience this week, and the Nasdaq's five-week losing streak snapping is a meaningful near-term signal. But the underlying data tells a more complex story — GDP disappointed sharply, core inflation is running at 2.9% YoY, and the Fed is in no hurry. The earnings picture (13.2% blended Q4 EPS growth, FactSet) is doing real work in supporting valuations at 21.5x forward P/E.

Next catalyst to watch: NVIDIA reports next week. Given the stock's weight in the index and the amount of AI capex narrative riding on its guidance, it has the potential to move markets in either direction.

Sources: U.S. Bureau of Economic Analysis (BEA), U.S. Department of Labor, CME FedWatch, FactSet Earnings Insight (Feb 13, 2026), Charles Schwab Weekly Trader's Outlook, Bloomberg.

*Not a financial advice

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