Weekly Economic Update: February 17th, 2026

Markets take another step back as ‘consolidation’ sets in

The markets continued their wild gyrations last week, hitting records one day and giving up all year-to-date gains the next. If you look at the S&P 500’s performance so far this year, it’s an up-and-down, peak-to-valley affair and is virtually flat on the year.¹

After running so fast and so far, the markets are “consolidating.” It’s a fancy way of saying the market is moving up and down and being indecisive. It’s also waiting for the next big news that will either start another run upward or lead to a sell-off, if the news is bad enough.

Right now, we don’t see anything bad that would lead to a sell-off. We’ve avoided a full government shutdown, although the Department of Homeland Security (DHS) remains shut down as Congress continues to debate its funding.³ If that’s not resolved, it will create problems mostly for FEMA, travelers and the U.S. Coast Guard, as funding for disaster recovery and the TSA are under DHS.

Tax season is here and refunds should lead to spending, which can boost the economy. Inflation is trending in the right direction and jobs are hanging in there (more in the next section). The economy is mostly in good shape and trending toward more robust growth. A new Federal Reserve chair will take control in June, and that person is expected to lower rates. And the One Big Beautiful Bill Act (OBBBA) has just begun to kick in. All these things are positive.

Meanwhile, things that could go wrong include a sudden, uncontained flare-up in Russia or Iran, or a U.S. economy that somehow falls off a cliff. That can happen if people are manipulated into thinking things are much worse than they are. But we will have elections in the fall, and a bad economy can be a death sentence to the incumbent party. Just something to keep in mind.

For now, buckle up and focus on the big picture and the long view. If your portfolio is out of balance, get yourself aligned with respect to your exposures and risk tolerance. This is not a time to be complacent. If needed, check in with your financial professional to help put your confidence back in place.

Jobs and inflation move in a better direction

The delayed January jobs report surprised the pundits who were calling for a meager increase of 70,000 for last month. According to the Bureau of Labor Statistics (BLS), the reality was that 130,000 jobs were created.⁴ That’s in sharp contrast to what the ADP employment report, the Job Openings & Labor Turnover Survey and Challenger employment report told us the week prior.

So, who’s right and who’s wrong? Maybe all of them, maybe none of them. The fact is that markets will be the final arbiter of that question. Let’s take the BLS report for a moment and see what the markets did with it.

At first, the markets were euphoric and spiked at the open on Wednesday, especially since the prior reported jobs data was pretty doom-and-gloom. A +130,000 print was a breath of fresh air and confirmation that the economy was still hearty and hale.

But just as quickly, the market realized a healthy jobs report would all but guarantee no rate cuts from the Fed in the first half of the year, since the Fed has shifted its stance from supporting job growth to fighting inflation. The market tanked in response.

Then just as quickly, on Friday the consumer price index (CPI) came in lower than expected (2.4% versus 2.5% forecast and down from 2.7% last month).⁵ Again, markets rallied — because if inflation was dropping, surely that means the Fed would start cutting rates sooner if we reached the magic 2% year-over-year target. Or would it?

While we pondered that question, AI worries once again reared their head.⁶ The concern is that too much is being spent, too many people are going to lose their jobs, and that entire industries and sectors would collapse. Markets went down the slide once more.

That’s the kind of month it’s been. But we’re still hovering near record highs, so people aren’t walking away yet. We’re waiting for the next big thing. The herd is restless but it’s also ready to run, hopefully in a positive direction.

Coming this week

• Markets are closed on Monday for Presidents Day.
• On Tuesday, we’ll get the Empire State manufacturing survey. The last reading was 7.7, which is pretty low.⁷ Any improvement would be welcomed.
• Wednesday will feature building permits for November and December, MBA mortgage applications, durable goods, trade balance data, retail and wholesale inventories. But the big deal on Wednesday will be the minutes from the most recent Fed meeting, which will be dissected for clues about the Fed’s next moves after last week’s jobs and inflation data.
• We’ll get weekly unemployment claims, the trade deficit and the Philly Fed manufacturing survey on Thursday.
• Finally, Friday will include the initial reading of fourth-quarter gross domestic product (GDP), which will include the impact from the government shutdown. As of last week, the Atlanta Fed GDPNow™ forecast was calling for 3.7% growth.⁸ That’s pretty good when you consider most estimates said the shutdown lowered GDP by 1%.⁹
• Friday will also include personal consumption expenditures (PCE), new home sales and consumer sentiment.
• Earnings season rolls on.¹⁰ So far, 74% of S&P 500 companies have reported actual results, with 74% reporting positive earnings per share (EPS) and 73% reporting positive revenues. Earnings growth for the fourth quarter is 13.2%; if that holds, it will mark the fifth consecutive quarter of double-digit earnings growth for the S&P 500 and an acceleration from the third quarter.
• For the current quarter, 31 S&P 500 companies have issued negative guidance and 38 have issued positive. Valuation is still historically high for the index, with the forward 12-month price-to-earnings (P/E) ratio at 21.5 versus 22.7 in Q3. This P/E ratio is higher than the 5-year (20.0) and 10-year (18.8) averages.

Sources:

¹ Yahoo! Finance. “S&P 500 (ˆGSPC).” https://finance.yahoo.com/quote/%5EGSPC/. Accessed Feb. 15, 2026.

² Yahoo! Finance. “Dow Jones Industrial Average (ˆDJI).” https://finance.yahoo.com/quote/%5EDJI/. Accessed Feb. 15, 2026.

³ Sahil Kapur, et al. NBC News. Feb. 13, 2026. “Homeland Security Department shuts down as Democrats and Trump negotiate changes.” https://www.nbcnews.com/politics/congress/know-dhs-government-shutdown-happening-impacts-rcna259001. Accessed Feb. 15, 2026.

⁴ U.S. Bureau of Labor Statistics. Feb. 11, 2026. “Employment Situation Summary.” https://www.bls.gov/news.release/empsit.nr0.htm. Accessed Feb. 15, 2026.

⁵ U.S. Bureau of Labor Statistics. Feb. 13, 2026. “Consumer Price Index Summary.” https://www.bls.gov/news.release/cpi.nr0.htm. Accessed Feb. 15, 2026.

⁶ Medha Singh and Sruthi Shankar. Reuters. Feb. 13, 2026. “From software to real estate, U.S. sectors under the grip of AI scare trade.” https://www.reuters.com/business/software-real-estate-us-sectors-under-grip-ai-scare-trade-2026-02-13/. Accessed Feb. 15, 2026.

⁷ Federal Reserve Bank of New York. “Empire State Manufacturing Survey.” https://www.newyorkfed.org/survey/empire/empiresurvey_overview. Accessed Feb. 15, 2026.

⁸ Federal Reserve Bank of Atlanta. “GDPNow.” https://www.atlantafed.org/research-and-data/data/gdpnow. Accessed Feb. 15, 2026.

⁹ Congress.gov. “The 2025 (FY2026) Government Shutdown: Economic Effects.” https://www.congress.gov/crs-product/R48832. Accessed Feb. 15, 2026.

¹⁰ John Butters. FactSet. Feb. 13, 2026. “Earnings Insight.” https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_021326.pdf. Accessed Feb. 15, 2026.

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