Weekly Market Update – February 20, 2026

Quick Takes

• U.S. markets managed to post decent weekly gains in the holiday-shortened week as investors navigated a flurry of economic reports, corporate earnings, and a major Supreme Court decision that could reshape U.S. trade policy.
• For the week, the S&P 500 broke a two-week losing streak with a 1.1% gain, the tech-heavy Nasdaq Composite rose +1.5% (its first weekly gain since early January), and the small-cap Russell 2000 was up +0.6% (its first time trailing the S&P 500 in 3 weeks).
• Washington’s 43-day partial government shutdown weighed on fourth quarter GDP. The Congressional Budget Office estimated that the shutdown lowered Q4 GDP growth by -1.0 to -2.0 percentage points. But Consumer Spending and Business Investment added positively to GDP in Q4.

Source: Bloomberg. Data as of February 20, 2026.
Price Returns for Equity, Total Returns for Bonds.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

Stocks and Yields Rise as Economic Data, Fed Minutes, and the Supreme Court Give Investors Much to Digest

U.S. Stocks: Weekly Gains Despite Volatility and Tariff Drama

U.S. markets were closed Monday for Presidents’ Day, but the major indexes still managed to post decent weekly gains. Investors also had plenty to digest—from a flurry of economic reports, a bunch of corporate earnings, and Friday’s Supreme Court ruling that struck down tariffs imposed under the International Emergency Economic Powers Act (IEEPA). Trading was choppy early in the week before stabilizing Friday and leaving major U.S. indexes positive for the week:

• Nasdaq Composite: +1.5% (its first weekly gain since early January) 
• S&P 500: +1.1% (breaks a two-week losing streak)
• Russell 2000 (small caps): +0.6% (first time trailing the S&P 500 in 3 weeks)
• S&P MidCap 400: +1.2% (its third straight week beating the S&P 500)

Corporate earnings also played a role in the market’s tone. With about 85% of S&P 500 companies reporting, earnings per share are up +13.6% year‑over‑year, and sales up +9.3%, setting up the strongest revenue growth since late 2022. A Bloomberg review found that mentions of “AI disruption” on earnings calls nearly doubled from the prior quarter. 

International Stocks: Gains, but Lagging the U.S.

Overseas markets rose as well—but not as sharply as U.S. markets. A +0.9% rise in the U.S. dollar created headwinds for global equities, offsetting some of the prior week’s weakness in the currency.

The MSCI EAFE Index (developed markets) gained +0.8%, extending its winning streak to 13 straight weeks. Europe outperformed, with the MSCI Europe Index up +1.4%, boosted by improving earnings expectations and supportive macro trends. The MSCI United Kingdom Index also notched gains of +1.1%. Japan was the main exception: after a huge +6.2% surge the prior week, the MSCI Japan Index fell -2.1% amid disappointing GDP results and the slowest inflation reading in two years.

Emerging markets kept pace with developed peers as the MSCI Emerging Markets Index rose +0.8%, though China dragged on performance. Mainland Chinese markets were closed for Lunar New Year, but the U.S.-based MSCI China Index continued to lag, falling -0.9% after a -0.3% loss the prior week. Elsewhere, the MSCI Latin America Index jumped +2.1%, and the MSCI Asia ex‑Japan Index rose +0.9%.

Bonds: Treasury Yields Rise as Risk Assets Improve

Bond markets saw mild weakness as Treasury yields climbed. The 2-year U.S. Treasury note yield rose +7 basis points to 3.48%, while the 10-year and 20-year Treasury yields each rose 3 basis points, to 4.08% and 4.72%, respectively. As a result, the Bloomberg U.S. Aggregate Bond Index slipped -0.1%, giving back part of the prior week’s strong rally.

Corporate bonds held up better than Treasurys. Investment-grade corporates were mostly unchanged, while high-yield bonds advanced alongside equities, helped by stabilizing sentiment in software and other tech-related industries.

Global bonds outside the U.S. also slid, with the Bloomberg Global Aggregate ex-U.S. Index down 0.3%.

Economics: Slowing Growth, Sticky Inflation, and Divided Fed Policymakers

A wave of economic releases offered a mixed picture of the U.S. economy.

Growth and Spending

• GDP grew +1.4% in Q4, down sharply from +4.4% in Q3, impacted by falling government spending, weaker exports, and a 43-day federal government shutdown.
• But consumer spending rose +2.4% during the quarter while government spending dropped -5.1%.

Housing data was mixed

• The NAHB homebuilder confidence index fell to 36, citing affordability challenges.
• Pending home sales slipped -0.8%.
• But housing starts rose +6.2% in December, and building permits were up +4.3%, both stronger than expected.

Inflation

Inflation remains stubborn:

• Core PCE, the Fed’s preferred measure, rose +0.4% in December and +3.0% year-over-year, up from +2.8%.
• Headline PCE rose +2.9%, its highest reading since March 2024.

Business Activity

• S&P Global’s Flash Composite PMI showed business activity slowing to a 10-month low, citing weaker demand, higher prices, and harsh winter weather. 
• Still, business expectations for the year ahead hit a 13-month high, suggesting the slowdown may be temporary.

Durable Goods and Trade

• Durable goods orders fell -1.4% in December due to a drop in aircraft orders.
• A key investment gauge for business spending—nondefense capital goods excluding aircraft—rose +0.6%, beating expectations.
• The U.S. trade deficit narrowed slightly to $901.5 billion for 2025, with a sharp improvement in the trade gap with China.

Federal Reserve

Minutes from the Fed’s January meeting revealed a divided committee. While all members agreed to keep rates at 3.5%–3.75%, opinions differed on what comes next:

• Some see room for cuts if inflation continues cooling.
• Others warn inflation risks remain too high.

A few members even raised the possibility of future rate hikes if needed.

The Bottom Line

The full slate of economic data showed some signs of softer growth and stubborn inflation, but with earnings still holding up well, the overall economy is showing resilience, and consumption remains healthy. Even rising U.S.–Iran tensions and uncertainty from the Supreme Court striking down IEEPA tariffs didn’t seem to faze markets.   

Chart of the Week

The U.S. economy closed out 2025 on a softer note, and a key reason was Washington’s partial government shutdown, which stretched from October 1, 2025, to November 12, 2025—a 43-day funding lapse and the longest shutdown in U.S. history. On Friday the Bureau of Economic Analysis (BEA) reported the advance estimate of real Gross Domestic Product (GDP) for the fourth quarter 2025 that showed the U.S. economy grew at just a +1.4% annual pace. That was a sharp reduction from the +4.4% annual pace seen in the third quarter and just half the +2.8% annual rate Wall Street was expecting. The BEA specifically noted that the release of the GDP report itself had been delayed because of the shutdown. Personal Consumption Expenditures (PCE), the main engine of the economy, increased +2.4% in Q4 versus +3.5% in Q3. The PCE component contributed +1.6 percentage points to real GDP growth in the fourth quarter, or more than the total GDP increase. However, Exports decreased -0.9% after jumping +9.6% in Q3, and Imports fell -1.3% after declining -4.4% in Q3. As a result, Net Exports were essentially flat, adding a scant +0.08 percentage points to Q4 GDP growth. The shutdown was really seen in Government spending, which dropped -5.1% in Q4 after rising +2.2% in Q3. That resulted in a -0.9-percentage point subtraction from Q4 real GDP growth. In contrast Gross Private Domestic Investment increased +3.8% after being flat the prior quarter, resulting in a +0.7 percentage point contribution to Q4 GDP growth. The GDP Price Index (GDP Price Deflator) increased +3.6% in Q4, above expectations to come in at +2.8%, but a bit slower than the +3.8% increase in Q4. The bottom line from the report is that the U.S. economy slowed much more than expected in the fourth quarter, but the 43-day government shutdown was responsible for most of the shortfall. The Congressional Budget Office (CBO) estimated that the shutdown lowered fourth-quarter real GDP growth by -1.0 to -2.0 percentage points, depending on the scenario modeled, while both Consumer Spending and Business Investment added positively to GDP in Q4. The resilience of private activity was seen in Real Final Sales to Private Domestic Purchasers—a measure of underlying Private-Sector Demand—which rose +2.4% in Q4, only modestly below the +2.9% rate of Q3.

Government Shutdown Weighed on Economic Growth in Fourth Quarter

U.S. Gross Domestic Product (GDP), Change from Previous Quarter

Notes: Seasonally and inflation-adjusted at annual rates.
Source: Commerce Department, The Wall Street Journal.

The Week Ahead

The economic calendar is lighter this week after last week’s full docket. Monday starts with a look at national economic activity from the Chicago Fed’s CFNAI report, followed by Factory Orders and final Durable Goods Orders for December, and the Dallas Fed regional manufacturing report for February. Home price indexes from S&P Cotality and FHFA are due Tuesday, along with February Consumer Confidence, final December Wholesale Inventories, and Richmond Fed manufacturing. Wednesday only has weekly MBA Mortgage Applications, and Thursday is light as well, with weekly Unemployment Claims and February Kansas City manufacturing. The week wraps up with the Producer Price Index (PPI) for January, the Chicago Fed manufacturing report for February, and Construction Spending for December. 

Only 15% of S&P 500 companies are left to report fourth quarter earnings, but they include some heavyweights. Dominion Energy reports Monday, and Home Depot is Tuesday, but the big action comes Wednesday with Nvidia, Salesforce, and Zoom Communications. Intuit and Baidu report Thursday, and Berkshire wraps up the week on Friday.

Did You Know?

LENGTHY BULLS – The current S&P 500 bull market crossed the 1,200-day mark at the end of January based on the standard +20% rally/decline closing threshold. The average length of the 26 prior bull markets since 1928 is 1,011 days, but the longest 9 bull markets, all of which lasted 1,000+ days, averaged 2,380 days. The average bear market has lasted just 286 days. (Source: Bespoke)

BUYBACKS TAKE A BACKSEAT – In 2025, S&P 500 companies spent 40% of operating cash flows on capex — nearly twice as much as the 21% they spent on stock buybacks. This is a sharp contrast to pre-ChatGPT 2021, when spending on buybacks was about 40%, or more than twice the amount of spending on capex. (Source: Nomura)

FALLING BEHIND – In Q4 2025, 12.7% of outstanding credit card balances were at least 90 days delinquent, which was up +67% from its trough of 7.6% in Q2 2022. The only period since 2003 when the delinquency rate was higher was from Q1 2010 through Q2 2011, when it peaked at 13.74%. (Source: NY Federal Reserve)

This Week in History

EXPROPRIATED – On February 20, 1961, the New York Stock Exchange delisted five stocks in one day. All were railroad or sugar companies based in Cuba. Their assets were expropriated by the new government of Fidel Castro. (Source: The Wall Street Journal)

Economic Review

• The preliminary “flash” S&P Global U.S. Purchasing Managers Index (PMI) indicated the slowest business growth for ten months in February amid weaker demand, higher prices, and bad weather. Rates of expansion moderated in both manufacturing and services, reflecting weakened order trends, in turn led by falling exports, though adverse weather was partly to blame. The S&P Global U.S. Composite PMI slipped to 52.3 in February, down from 53.0 the month before. That was below Wall Street expectations for 53.1 but still in expansion territory for 37 consecutive months now (results above 50 signals economic expansion). Growth slowed to modest rates across both manufacturing and services, down to 7- and 10-month lows, respectively. The Manufacturing PMI declined to 51.2 from 52.4 the prior month, which is where it was expected to remain. Meanwhile, the Services PMI softened to 52.3, down from 52.7 the prior month, and below expectations to come in at 53.0. New Orders growth cooled, with factories reporting a slight drop in orders for the second time in the past three months, while service providers reported a weakened, but sustained, inflow of New Orders. Both sectors reported falling Export Orders, which collectively fell at one of the steepest rates seen over the past year. Companies cited high prices, stretched affordability, tariffs, and subdued confidence among customers as key drags on sales, though adverse weather was often noted as an additional factor disrupting business across both manufacturing and services during the month. Sluggish sales growth and concerns over rising costs led to a further month of very modest Employment growth, albeit with some companies also reporting difficulties finding staff. Payrolls rose only marginally for a third successive month and at the weakest rate since last April. Hiring slowed to marginal rates in both manufacturing and services. Average Output Prices charged for goods and services increased in February at the steepest rate since last August. Although Output Price inflation moderated in the manufacturing sector to a 14-month low, services inflation jumped to a 7-month high, at one of the strongest rates of increase in the past three and a half years. More encouragingly, companies’ expectations for output in the year ahead improved markedly in February, rising to a 13-month high. Greater optimism was seen in both manufacturing and services. Companies are hoping that better weather will help drive better sales after February saw many businesses hampered by extreme cold. Survey respondents also cited expectations of improving economic conditions based on supportive financial conditions, including lower interest rates and government policies such as tax breaks, as well as more aggressive marketing and investment in business expansion.
• U.S. Industrial Production increased +0.7% for the month of January, above expectations for +0.4% and +0.2% the prior month (revised down from +0.4%). Manufacturing Production, which represents about three-quarters of total Industrial Production, was up +0.6%, above expectations for a 0.4% increase and the prior month’s flat reading (revised lower from +0.2%). Year-over-Year, Industrial Production was up +2.3%, following the prior month’s +2.5% annual pace. Capacity Utilization improved to 76.2% from 75.7% the prior month (revised down from 76.3%). Capacity Utilization reflects how much a manufacturing plant is being used to produce things. The key takeaway from the report is that industrial production easily exceeded estimates from a strong manufacturing activity, which was the best since February 2025. 
• The final reading of the January University of Michigan Consumer Sentiment Index declined to 56.6 from the preliminary reading of 57.3 and the final level of 56.4 in December. It was expected to remain at the 57.3 preliminary reading. In the same period a year ago, the index stood at 64.7. The Current Economic Conditions component dipped to 56.6 from the preliminary reading of 58.3 and the final 55.4 the prior month. The Consumer Expectations component was unchanged at 56.6 from the preliminary reading and down from 57.0 from the prior month. One-year inflation expectations fell to 3.4% from the preliminary 3.5% and are down from 4.0% the prior month. The five-year inflation expectations slipped to 3.3%, down from the 3.4% preliminary reading, which is unchanged from the prior month. The bottom line is that February consumer sentiment slipped from the preliminary readings two weeks ago but is up slightly from January.
• The Census Bureau reported preliminary Durable Goods Orders for long-lasting items (such as televisions, appliances, and transportation equipment) fell -1.4% in December, following an upwardly revised +5.4% rise (from +5.3%) the prior month. That exceeded Wall Street expectations to fall -2.0%. Durable Goods Orders Excluding Transportation were up +0.9%, above expectations for a +0.3% reading and the prior month’s unrevised +0.4% rise. The important Core Capital Goods Orders (capital goods excluding volatile sectors like transportation and defense), a proxy for business spending, jumped +0.6%, well above expectations for a +0.3% reading, but down from the sharply upward revised +0.8% increase the prior month (originally +0.4%). Core Capital Goods Shipments, which are factored into GDP, rose +0.9%, exceeding expectations for a +0.3% gain and the unrevised +0.2% reading the month before. 
• According to the US Census Bureau, the US Trade Deficit for December widened to -$70.3 billion from -$53.0 billion in November (revised from -$56.8 billion). That was worse than the -$55.5 billion deficit expected. Smaller trade deficits help contribute to economic growth, while larger deficits inhibit growth. Exports were $287.3 billion, -$5.0 billion less than November, while Imports were $357.6 billion, +$12.3 billion more than November. Adjusted for inflation, real goods deficit widened by -$12.5 billion to -$97.1 billion. 
• The Census Bureau preliminary report of Wholesale Inventories for December rose +0.2% to $917.2 billion, matching expectations and the prior month (unrevised). Year-over-Year (YoY) inventories were up +2.8%, up from the +1.8% annual rate the prior month. That is still well below the typical +4% to +6% annual increase in strong economies. Inventories are goods produced for sale that have not been sold yet.
• The New York Fed’s Empire State Manufacturing Index, a gauge of manufacturing activity in the state, declined -0.6 points to moderate growth of +7.1 in February. But that was much better than Wall Street expectations for a drop to +6.2. New Orders slipped -0.8 points to +5.8, and Shipments plunged -17.3 points to -1.0, after hitting the highest in over a year in January. The Employment index rose sharply, up +13.0 points to +4.0, and the Average Workweek was up +7.5 points to +2.1. The Prices Paid index increased +6.3 points to +49.1, and the Prices Received index was up +7.8 points to +22.2. The outlook stayed optimistic, with the Six Months Ahead General Business Conditions index rising +4.4 points to +34.7, its highest level since early last year. Notably, the expected Capital Expenditures index rose +8.0 points to +18.2, a multi-year high, indicating a strengthening in capital spending plans.
• The Philly Fed Manufacturing Business Outlook Survey rose +3.7 points to +16.3 in February. That was sharply higher than Wall Street forecasts for a drop to +7.5. Readings above zero indicate economic expansion and below zero signal economic contraction. The indexes for New Orders and Shipments fell to +11.7 and +0.3, respectively. Inventories rose significantly, up +8.2 points to -0.2. The Employment index fell into contraction, down -11.0 points to -1.30, while the Average Workweek was down -20.7 points to -11.6. Prices Paid remains elevated but declined -8.0 points to +38.9 while Prices Received decreased -11.1 points to +16.7, indicating ongoing pricing power for firms. Future activity expectations improved markedly, with the Future General Activity index rising +17.3 points to +42.8.
• The cost of goods and services rose +0.4% in December, a tick above expectations to rise +0.3%. For the year, the Personal Consumption Expenditure (PCE) Deflator (aka PCE Price Index) was up +2.9%, also a tick above expectations for +2.8%, which is what it was the prior month (unrevised). The Core PCE Price Index, which excludes food and energy and is the Fed’s preferred inflation gauge, was also up +0.4% for the month, above expectations for +0.3% and up from the prior month’s +0.2% (unrevised). Year-over-year, the Core-PCE Price Index was up +3.0%, above expectations for +2.9% and up from +2.8% (unrevised) the prior month. The key takeaway from the report is that the Core PCE Price Index, the Fed’s preferred inflation gauge, increased to +3.0%, moving away from the Fed’s +2.0% target.
• Personal Income increased +0.3% in December, matching expectations and follows +0.4% the prior month (revised up from +0.3%). Real Disposable Income was flat 0.0% month-over-month, after rising +0.1% the prior month. Personal Spending rose +0.4% in December, a tick above expectations for +0.3% and matching the prior month (after it was revised down from +0.5%). After adjusting for inflation, Real Personal Spending was +0.1% for the month, matching expectations and down a tick from the prior month’s +0.2% reading (revised lower from +0.3%). The Personal Savings Rate, as a percentage of disposable personal income, declined to +3.6% from +3.7% the previous month.
• December Housing Starts increased +6.2% month-over-month to a seasonally adjusted annual rate of 1.404 million units, beating expectations for a +1.1% increase to 1.304 million units. That compares to a -1.6% drop, or 1.388 million units from the prior month (unrevised). Single-unit starts were up +4.1%, and Multi-family jumped +11.3. Housing starts peaked at 1.8 million in April 2022. Regionally, new construction single-unit starts were up +24.7% in the West, +2.9% in the Northeast, and +0.9% in the South, but down -6.1% in the Midwest. Moving to Building Permits, one of the leading indicators tracked by the Conference Board and indicator of future construction activity, they increased +4.3% to an annualized rate of 1.448 million units. That was above expectations for 1.400 million units and compared to the prior month’s unrevised -1.6% decrease to 1.388 million units. Single-unit permits fell -1.7% while multi-family units were up +16.7%. Regionally, single-unit permits rose +7.0% in the Northeast and +5.3% in the West, but fell -0.8% in the Midwest and -5.3% in the South. 
• The National Association of Realtors (NAR) reported that Pending Home Sales slipped -0.8% in January after the prior month’s -7.4% drop (revised higher from -9.3%). That was far below Wall Street expectations for a +2.0% increase. At 70.9, the seasonally adjusted US Pending Home Sales Index was back at July 2025 levels following its highest level since February 2023 the prior month. On a non-seasonally adjusted basis the year-over-year rate of change in sales fell -1.2%, down from the prior month’s -1.1% annual rate (revised up from -1.3%). The decline was mixed across census regions: the Midwest rose +5.0%, the West was up +4.3%, the Northeast was down -5.7%, and the South fell -4.5%. 
• The Commerce Department reported New Home Sales for December declined -1.7% month-over-month to a seasonally adjusted annual rate of 745,000 units, versus an unrevised 758,000 units the prior month. New Home Sales data tend to be volatile month-on-month and are often revised.  New Home Sales remain far below the recent peak of over 1 million units in August 2020, but are running above the pre-pandemic average of 600,000. Year-over-year, sales of new homes were up +3.8% following a +12.3% annual rate the prior month. By region, for the month sales fell -6.7% in the South and plunged -37.3% in the Northeast, but rose +31.7% in the Midwest and +9.0% in the West. The Median New Home Price decreased -2.0% to $414,400 from the prior year. The months of supply at the current rate of sales was 7.6, down from 7.7 the prior month.
• Homebuilder confidence fell in February as the National Association of Home Builders (NAHB) Housing Market Index (HMI) slipped -1 point to 36, versus expectations to rise to 38. A year ago, the index stood at 42. The index is based on a 0-to-100 scale, where any number over 50 indicates a good reading, and below 50 is considered negative sentiment. Sentiment has been in negative territory for 20 months in a row. The Current Sales component was unchanged at 41, while Sales Expectations in the Next Six Months fell -3 points to 46, and Traffic of Prospective Buyers was down -2 points to 22. For the month, 36% of builders reported cutting home prices, down from 40% the prior month. The average price reduction was 6% and use of sales incentives was 65%, both at the same level as in January. On a regional basis, the Northeast fell -5 points to 42, the West was down -4 points to 30, the Midwest slipped -1 point to 41, and the South was unchanged at 35.
• Weekly MBA Mortgage Applications rose +3.0% for the week ending February 13, after slipping -0.3% the prior week. The Purchase Index dipped -2.7% after falling -2.4% the prior week. The Refinance Index jumped +7.1% after rising +1.2% the prior week. The average 30-Year Mortgage Rate fell to 6.17% from 6.21% the prior week.
• Weekly Initial Jobless Claims fell -23,000 to 206,000 for the week ending February 13, which was better than expectations for 225,0000. The prior week was revised higher by +2,000. The number of people already collecting unemployment claims (i.e., Continuing Claims) rose +17,000 to 1,869,000 for the week ending February 7, which was worse than expectations for 1,860,000. The prior week’s reading was revised lower to 1,852,000 from 1,862,000.  

Asset Class Performance

Source: Bloomberg.
Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by The Retirement Planning Group. The performance of those funds may be substantially different from the performance of the broad asset classes and to proxy ETFs represented here. US Bonds (iShares Core US Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (Vanguard Total International Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares US Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by 24% US Bonds, 10% International Bonds, 6% High Yield Bonds, 13.8% Large Growth, 13.8% Large Value, 3.6% Mid Growth, 3.6% Mid Value, 1.2% Small Growth, 1.2% Small Value, 16.8% International Stock, 4.2% Emerging Markets, 1.8% Real Estate.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.