Weekly Market Commentary February 17th to February 20th 2026
This past week got investors’ attention, with weaker-than-expected economic growth, higher-than-expected inflation, and a tariff fight between the President and the Supreme Court.
On Friday, the Supreme Court ruled that tariffs imposed using the International Emergency Economic Powers Act (IEEPA) were illegal, ending a portion of tariffs related to trafficking and reciprocal tariffs. The act gives the President a number of broad economic abilities in the event of a national emergency. While these abilities allow changes to foreign trade, they do not allow the imposing of tariffs without Congressional authorization. It’s important to note that this does not reject all tariffs, as tariffs on steel, aluminum, Chinese goods, and solar cells are still in place due to Presidential powers previously approved by Congress in years past. The President responded to this decision by issuing a 10% global tariff via Section 122 of the Trade Act of 1974, which allows the President to impose duties of up to 15% for up to 150 days to combat trade deficits or unreasonable restrictions on U.S. commerce. This will act to replace the tariffs struck down by the Supreme Court, which are responsible for bringing in an estimated $125 billion in revenue. There was no language from the Supreme Court regarding what happens now with this previously collected revenue.
GDP for the fourth quarter came in well below expectations at 1.4%. Government spending was a major detractor as it was shut down for half of the quarter, causing a full point reduction in growth. Consumption remained solid, however, and business investments were also strong. As a result, this quarter is viewed as an outlier with miscalculated estimates, leaving the expectation of a bounce back for the first quarter of 2026.
Personal Consumption Expenditures (PCE) inflation rose 0.4% for December and 2.9% for the year, both ticking higher and above estimates. The survey showed consumers moved away from tariff-affected goods and toward services as consumption rose 3.4% in the sector. With income growth being tame, consumers appear stretched thin as the savings rate fell to a three-year low.
Home building sentiment grew at year’s end as homebuilders boosted production to take advantage of lower borrowing costs. New residential construction rose to a five-month high and housing starts increased 6.2%. New home sales saw a modest decline in December after jumping 15% in November. The annualized pace of new home sales reached 745,000 at year-end with strength in the West and Midwest.
The equity markets had a positive week, with an overall positive reaction following the tariff outcome. The S&P 500 closed 1.1% higher to 6,909, the Nasdaq 1.5% higher to 22,886, and the Dow Jones Industrials 0.3% higher to 49,626. U.S. Treasury yields also increased, with the 2-Year 7bps higher to 3.48% and the 10-Year 3bps higher to 4.08%.
Next week we will get more inflation data in the form of PPI for the month of January.
