Market Commentary

For the week ending 2/20/2026

 

Wall Street wrapped up another tumultuous week with all three major U.S. indices rallying to close ahead.

While the S&P 500 reached a new all-time intraday high just above the 7,000 level at the end of January, the major indexes have drifted a bit lower since then, amid renewed fears of artificial intelligence (AI) disruption and geopolitical tensions.

The Federal Reserve also signaled that they may not be in a hurry to lower interest rates and investors digested mixed economic data and mixed corporate earnings reports, escalating geopolitical tensions, and a key SCOTUS ruling.

Minutes from the January FOMC meeting, released on Wednesday, revealed that policymakers are in “no rush” to resume interest rate cuts. Most officials indicated that progress toward 2% inflation might be slower and more uneven than expected. Most Fed members emphasized that rates should likely remain steady for “some time” to assess incoming data. Wall Street still estimates that the next Fed rate cut likely won’t be until June. The stock market perceived these minutes as a bit more hawkish than anticipated.

Meanwhile, the headline December durable goods orders fell 1.4% in-line with estimates. However, core capital goods (excluding defense and aircraft) rose 0.6% m/m, above estimates for 0.3%. Both November and December housing starts were ahead of expectations. July industrial production increased more than projected. Weekly initial jobless claims came in lower than expected. However, on Friday it was reported that fourth-quarter GDP growth was just 1.4%, below the 1.9% consensus. Inflation remains elevated as December headline PCE came in at 2.9% vs 2.8% expected, and Core PCE was 3.0% in-line with expectations.

Fourth quarter 2025 earnings season continued with significant reports from some consumer-facing companies. Walmart was the primary focus this week with its first report under its new CEO. Walmart slightly beat fourth quarter expectations, raised its dividend, and announced its largest share buybacks ever, but lowered earnings guidance for the future. Overall, blended earnings growth for S&P 500 companies is on track for a 13.2% gain, marking a fifth straight quarter of double-digit profit growth.

Geopolitical risks have also added to market uncertainty and pressured oil prices. The United States and Iran held another round of talks last week trying to negotiate terms for Iran to dial back (or end) its nuclear program, but many are skeptical about the prospects of reaching a diplomatic solution, noting big gaps remain after these talks. Early last week Iran temporarily closed parts of the Strait of Hormuz for several hours to conduct military drills. President Trump said a change in power in Iran “would be the best thing that could happen.” The U.S. military has been making significant preparations for a potentially week-longs military operation in Iran. The U.S. currently has the most air power in the Middle East region since 2003. Reports indicate that the U.S. military is prepared to strike Iran very soon. However, Trump has yet to make a final decision, suggesting he will provide an update within the next week.

On Friday morning the Supreme Court (in a 6-3 ruling) voted against President Trump’s tariffs that he imposed under the International Emergency Economic Powers Act (IEEPA). However, Trump’s sector-specific tariffs are not subject to this ruling and will remain in place. The Trump administration will look at various other ways to impose global tariffs to offset this ruling, but that will likely take some time to play out.

Markets will be watching the Iran news very closely, as well as this week’s corporate earnings and economic data.

For the week, the Dow closed up .3% to 49,626, the S&P rose 1.1% to 6,910 and the Nasdaq climbed 1.5% to 22,886.

Oil jumped 5.6% to $66.24/bbl. Gold rose 0.7% to $5,081/oz. and the yield on the 10-year Treasury rose slightly to 4.09%.

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