Market Intelligence Brief (MIB)

• SCOTUS Ruling: Supreme Court ruled 6-3 that Trump’s IEEPA-based tariffs are unconstitutional; Trump immediately announced a replacement 10% global tariff under Section 122 of the Trade Act of 1974, effective next week.

• GDP Shock: Q4 2025 GDP advance estimate came in at 1.4% annualized — less than half the 3.0% consensus — with core PCE simultaneously at 3.0% YoY, reviving stagflation concerns not seen since the early 2026 tariff panic.

• Earnings Split: Deere (DE) surged 12% on a blowout Q1 beat and “cycle bottom” call; Walmart (WMT) slipped 1.4% despite a slight beat as tariff-related guidance caution overshadowed the $30B buyback announcement.

• Tech Rout Extends: CrowdStrike fell 7% and Oracle dropped 5%, extending a year-to-date rout that has the S&P software & services index down roughly 20% in 2026 amid AI displacement fears.

• Labor Market Bright Spot: Weekly jobless claims dropped to 206K (vs. 225K expected), declining 23K week-over-week — the largest single-week drop since November — signaling a still-resilient labor market.

• Nvidia Next Week: Q4 FY2026 earnings on Wednesday, February 25 will be the defining market event of the coming week — either validating or upending the AI infrastructure investment thesis.

1. Tariff Whiplash Becomes the New Normal. The Supreme Court giveth, Trump taketh back — but in a different legal wrapper. While today’s SCOTUS ruling eliminates the IEEPA legal basis for sweeping tariffs, the administration’s Section 122 replacement preserves trade uncertainty for at least another 150 days, and likely longer. Markets cannot price in permanent tariff relief; the refund battle for IEEPA duties will add another layer of litigation.

2. Stagflation Trap Tightens the Fed’s Options. Today’s twin data prints — a 1.4% GDP reading and a 3.0% core PCE — place the Federal Reserve in an impossible position. A weakening economy argues for rate cuts; sticky inflation above target prohibits them. With Chair Powell’s term expiring in May 2026 and no clear successor named, policy continuity itself is in question, adding a leadership risk premium to an already complex backdrop.

3. AI’s Reckoning Is Broadening From Pure-Play to Legacy Tech. The software sector’s 20% YTD decline reflects a structural repricing: investors are discounting legacy revenue streams for cloud and SaaS companies as AI increasingly performs tasks that once required enterprise software subscriptions. Akamai’s 9% guidance-driven plunge (AI capex squeezing margins), combined with Oracle and CrowdStrike’s extended slides, suggests this is not a short-term rotation — it is a fundamental disruption narrative playing out in real time.

1. Supreme Court Strikes Down Trump’s IEEPA Tariffs 6-3 in Landmark Constitutional Ruling

The core facts:The Supreme Court ruled 6-3 today that President Trump’s use of the International Emergency Economic Powers Act (IEEPA) to impose sweeping “reciprocal” global tariffs — including the “Liberation Day” tariffs — is unconstitutional. Chief Justice John Roberts authored the majority opinion, writing that “IEEPA does not authorize the President to impose tariffs.” The ruling immediately halted the IEEPA-based duties, which had represented the largest US tax increase as a share of GDP in more than 30 years, costing the average US household an estimated $1,300 in 2026. The decision was made by a 6-3 margin, with the conservative majority joining in the ruling against Trump’s tariff authority.

Why it matters:The ruling is one of the most significant executive power decisions in decades, permanently eliminating IEEPA as a tariff vehicle and forcing any future tariff regime into narrower statutory authorities with clearer congressional guardrails. For markets, the immediate effect was a sharp relief rally in tariff-sensitive sectors — consumer discretionary surged 1.8%, e-commerce stocks popped 2-8%, and the dollar and Treasuries weakened. However, the ruling’s market impact is incomplete: the decision returns to the Court of International Trade the question of how refunds will work for already-collected duties, creating a multi-year litigation overhang. The net estimate is that full implementation of the ruling would remove a -0.3% drag on US GDP, though much of that benefit is offset by the new tariffs announced within hours.

What to watch:Monitor the Court of International Trade proceedings on tariff refund mechanics — companies that paid IEEPA duties will seek rebates worth potentially tens of billions of dollars. The first Section 122 legal challenges (which are almost certain) could emerge as early as next week.

2. Trump Signs Executive Order Imposing 10% Global Tariff Under Section 122, Effective Next Week

The core facts:Within hours of the Supreme Court’s IEEPA ruling, President Trump announced — and is signing — an executive order imposing a 10% global tariff on all nations under Section 122 of the Trade Act of 1974. The president cited “large and serious” balance-of-payments deficits as the legal basis. Section 122 allows the president to impose import surcharges of up to 15% for up to 150 days. Unlike the struck-down IEEPA duties, which ranged up to 50%+ on some countries, the new 10% rate is lower but applies universally. Trump said the duties will be “over and above” existing tariffs already in place and will take effect next week.

Why it matters:Section 122 tariffs have never been used on this scale, and their legal durability is far from assured — analysts at the Tax Foundation and other trade law experts immediately flagged them as vulnerable to challenge under the same WTO and constitutional principles that sank the IEEPA tariffs. The 150-day maximum creates a built-in expiration in mid-July 2026, unless Congress acts to extend them, which would require legislative alignment that doesn’t currently exist. Economically, a blanket 10% global tariff still represents a meaningful cost burden for importers, keeping inflationary pressures alive in goods and adding complexity to corporate supply chain planning. Markets gave back a portion of the SCOTUS relief rally on the announcement; the net is that trade uncertainty has not been resolved — only restructured.

What to watch:Watch for legal challenges to the Section 122 tariffs in federal court; watch Congressional leadership for any signals on extending or modifying the tariffs beyond the 150-day limit (projected expiration ~mid-July 2026). Any court-ordered stay would trigger another market-moving event.

3. Q4 2025 GDP Advance Estimate: 1.4% vs. 3.0% Consensus — Government Shutdown Dragged Economy

The core facts:The Bureau of Economic Analysis released its advance estimate for Q4 2025 GDP today, showing real GDP grew at an annualized rate of just 1.4% — sharply below the 3.0% consensus and a dramatic deceleration from Q3 2025’s 4.4% rate. The BEA estimated that a partial government shutdown (October 1 to November 12, 2025) subtracted approximately 1.0 percentage point from the reading due to reduced federal services and employee furloughs. Consumer spending and private investment were positive contributors, but government spending and exports were drags. For full-year 2025, real GDP grew 2.2%, a modest decline from 2.4% in 2024.

Why it matters:Even adjusting for the ~1pp government shutdown drag, underlying Q4 growth was only ~2.4%, which is not alarming in isolation but is deeply concerning in the context of today’s other release: core PCE at 3.0%. The combination of below-trend growth (1.4%) and above-target inflation (3.0%) is the textbook definition of stagflation, placing the Federal Reserve in a genuine policy bind. A Fed that cuts to stimulate a weakening economy risks stoking inflation further; a Fed that holds or hikes risks a sharper economic slowdown. Chair Powell’s term expires in May 2026, adding a leadership transition risk premium on top of the policy dilemma.

What to watch:The first revision to Q4 2025 GDP will be released in approximately one month; watch whether the revision adjusts the shutdown drag and paints a cleaner picture of private-sector momentum. The Atlanta Fed GDPNow model currently tracks Q1 2026 at 3.1%, suggesting Q4 was idiosyncratic — but the February 24 GDPNow update will incorporate today’s PCE data.

4. Core PCE Hits 3.0% Annually, 0.4% Monthly — Stagflation Signal Revives “Higher for Longer” Fears

The core facts:The BEA’s Q4 2025 advance report included December PCE data showing the core Personal Consumption Expenditures price index — the Fed’s preferred inflation gauge — rose 0.4% month-over-month, exceeding the 0.3% consensus. On an annual basis, core PCE stands at 3.0%, a full percentage point above the Fed’s 2.0% target. The monthly acceleration was driven by a surprising rebound in goods prices (attributed in part to cumulative tariff pass-through) and persistent strength in services costs. Headline PCE also stood at approximately 2.9%-3.0% year-over-year.

Why it matters:The 0.4% monthly print is the “hinge of 2026” because it breaks the narrative of gradual disinflation that many market participants had counted on to justify Fed rate cuts in H1 2026. With the Fed currently holding at a 3.50-3.75% target range (per the January FOMC meeting minutes released Wednesday), today’s PCE data virtually eliminates the probability of a rate cut at the March meeting. The FOMC is already in an evidence-based, data-dependent holding pattern; a 3.0% core PCE provides no evidence to justify easing. Gold and silver surged on the “stagflation trade” — a playbook last seen prominently in 2022 — as investors sought inflation hedges uncorrelated to Fed policy flexibility.

What to watch:Watch the next core PCE release (scheduled for approximately March 13, 2026) — a second consecutive 0.3%+ monthly print would cement stagflation as the base case and trigger a meaningful repricing of rate-cut probabilities. Also watch Fed speakers next week for any pivot in language on the inflation trajectory.

5. Software Sector Reckoning Deepens: CrowdStrike -7%, Oracle -5%; S&P Software Index -20% YTD in AI Disruption Narrative

The core facts:CrowdStrike (CRWD) fell more than 7% and Oracle (ORCL) dropped approximately 5% today, extending what has become one of the most dramatic sector-level re-ratings of 2026. The S&P software and services industry group is now down roughly 20% year-to-date, making it one of the worst-performing large-cap sectors. Truist lowered CrowdStrike’s price target to $550 from $600 (maintaining Buy) but flagged competitive concerns from AI-native security tools. Akamai Technologies (market cap ~$13B) also plunged as much as 13% after revealing disappointing Q1 guidance, with AI-related capital expenditure expected to consume 23-26% of revenue in 2026, crushing margins.

Why it matters:The software sector’s collapse is not a rotation — it is a structural repricing. The core thesis: AI is eroding the economic moat of legacy software platforms by automating workflows, replacing SaaS subscriptions, and enabling enterprises to build internal tools at a fraction of the prior cost. For Oracle, the risk is AI-generated code eroding database and enterprise cloud contracts. For CrowdStrike, AI-native threat detection from well-funded startups threatens the Falcon platform’s premium pricing. This creates a portfolio management dilemma: the stocks that led the 2023-2025 software cycle are now the laggards, and the AI infrastructure beneficiaries (Nvidia, TSMC) are priced at extreme valuations. Nvidia’s earnings next Wednesday (Feb 25) will be a critical real-time test of which side of this trade is correct.

What to watch:Nvidia earnings on Wednesday, February 25 AMC will either accelerate or arrest the software sector rout: strong AI infrastructure demand from Nvidia would confirm the AI spending cycle continues, which should eventually convert to software demand. A Nvidia miss or cautious guidance would validate the “AI bubble” narrative and likely accelerate software sector selling. CrowdStrike reports March 3 as the sector’s next major checkpoint.

6. Jobless Claims Drop to 206K — Largest Weekly Decline Since November, Defying Layoff Fears

The core facts:Initial jobless claims for the week ending February 14 fell to 206,000 — a decrease of 23,000 from the prior week’s revised level — and came in sharply below the 225,000 consensus estimate. This was the largest single-week decline in initial claims since November 2025. Continuing claims (for the week ending February 7) rose to 1.869 million from 1.852 million the prior week, suggesting that while hiring is slow, active layoffs remain contained.

Why it matters:In a week dominated by bearish GDP and PCE data, the jobless claims print is the most important countervailing signal. A labor market that remains tight with sub-210K weekly claims provides the Fed with cover to hold rates steady without triggering an economic crisis. The rising continuing claims (1.869M) do reveal a subtle weakness: laid-off workers are taking longer to find new jobs, and median unemployment duration is near four-year highs. This is consistent with the “soft hiring, low firing” dynamic that has characterized 2025-2026. For portfolio managers, a strong labor market reduces the immediate recession risk premium but simultaneously reduces the probability of Fed rate cuts, which is broadly neutral-to-slightly-negative for equity multiples at current levels.

What to watch:Next jobless claims release Thursday, February 26; watch whether the sub-210K trend holds or if the week ending February 21 shows a reversal, particularly in tech and government-adjacent sectors where DOGE-related federal workforce reductions could begin showing in state unemployment filings.

7. Tariff Ruling Triggers Broad Beneficiary Rally: Amazon +2.6%, Alphabet +4%, Etsy +8.4%, eBay +3.9%, Abercrombie +Surge

The core facts:The SCOTUS tariff ruling triggered sharp gains in consumer-facing and import-dependent companies. E-commerce platforms led: Etsy surged 8.4%, eBay added 3.9%, and Amazon gained 2.6%. The mega-cap tech names with global hardware supply chains also benefited — Alphabet advanced ~4% and Meta rose 2%. Traditional retailers with heavy merchandise import exposure, including Abercrombie & Fitch, posted outsize gains. Consumer discretionary was the best-performing S&P 500 sector on the day, advancing 1.8%. Stanley Black & Decker, which sources heavily from Chinese manufacturing, also posted notable gains.

Why it matters:Today’s rally in tariff-sensitive names reflects genuine economic relief: the struck-down tariffs had been directly adding to goods inflation and compressing retailer and manufacturer margins. However, with Trump announcing a replacement 10% global tariff effective next week, the gains in the most import-dependent companies may prove fragile. A 10% universal tariff still meaningfully raises input costs for companies relying on imported merchandise — it is less severe than the country-specific rates that could reach 50%+, but is not zero. Portfolio managers should be cautious about treating today’s tariff-winner rally as sustainable until the Section 122 legal status is resolved.

What to watch:Watch whether Section 122 tariffs receive a court-ordered stay in the days or weeks following implementation; a stay would be broadly bullish for the tariff-winner basket and consumer discretionary names broadly. Any legal challenge filing will move these stocks materially.

8. Atlanta Fed GDPNow Tracks Q1 2026 at 3.1% — Sharp Divergence from Q4’s 1.4% Suggests Idiosyncratic Factors

The core facts:The Atlanta Federal Reserve’s GDPNow model updated today (February 20) estimates Q1 2026 real GDP growth at 3.1% annualized — more than twice the Q4 2025 official print of 1.4%. The model’s next update is scheduled for February 24, at which point it will incorporate today’s PCE and GDP data, and its estimate may revise lower. GDPNow is a “nowcast” that updates as data arrives and is not an official Atlanta Fed forecast.

Why it matters:The sharp divergence between Q4’s 1.4% and Q1’s 3.1% tracking estimate supports the view that Q4’s weakness was driven primarily by the government shutdown’s -1.0pp drag rather than a broad-based demand slowdown. If the GDPNow model’s Q1 estimate holds, it would suggest the US economy is not in a structural deceleration, which would be bullish for risk assets and supportive of the “no recession” camp. However, today’s hot PCE print may cause the February 24 update to revise Q1 lower, as higher inflation typically implies reduced real consumption growth. The tension between strong nominal growth and high inflation makes the GDPNow read particularly difficult to interpret in this environment.

What to watch:The February 24 GDPNow update will incorporate today’s PCE data and is the most critical near-term data point for the Q1 growth narrative. Watch also the February 24 Consumer Confidence print (forecast: ~105) as a leading indicator of whether PCE-driven inflation is beginning to suppress spending behavior.

9. Gold Holds Above $5,000, Silver Surges 3%+ as “Stagflation Trade” Returns on GDP Miss + Hot PCE

The core facts:Gold traded at $5,012.30 per ounce — holding its position above the psychologically significant $5,000 level — while silver surged 3.07% to $80.46 per ounce. Crude oil (WTI) set a fresh 2026 high at $66.72/bbl (+2.57%), driven by a combination of demand optimism from the tariff ruling and tight supply dynamics. The simultaneous gains across gold, silver, and oil on a day when GDP missed badly and PCE surprised hot is a textbook “stagflation trade” — a portfolio positioning that historically performs in environments where growth stalls and inflation persists.

Why it matters:Gold first crossed $5,000 in January 2026, driven by geopolitical risk, central bank buying, and US fiscal concerns (national debt exceeding $37.8 trillion). Today’s GDP/PCE data reinforce the fundamental argument: if the Fed cannot cut rates (inflation is too high) and cannot raise rates (growth is too weak), gold and hard assets are one of the few asset classes that are uncorrelated to Fed policy flexibility. For portfolio managers, the “stagflation trade” is a significant allocation signal — overweights in gold, silver, energy, and TIPS versus underweights in long-duration growth equities and rate-sensitive sectors.

What to watch:Watch gold for a sustained break above $5,100 — the January 2026 high — which would signal institutional accumulation beyond macro hedging into a structural bull market allocation. Also watch 10-year real yields (TIPS yields); a move lower in real yields would amplify gold’s next leg up.

10. Tariff Refund Battle Begins: Companies That Paid IEEPA Duties Face Years of Litigation to Recover Billions

The core facts:The Supreme Court’s ruling returns to the Court of International Trade the question of how refunds for already-collected IEEPA tariff duties will work. The Court’s decision provides no guidance on refund mechanics, leaving the resolution of potentially tens of billions of dollars in overpaid duties to be litigated in the lower courts. Companies that imported goods and paid IEEPA tariff duties over the past 1-2 years will need to file individual refund claims, and the process is expected to be protracted. Separately, the Trump administration’s 10% Section 122 tariff — announced today — is expected to face immediate legal challenges on constitutional and trade law grounds, given Section 122’s untested and arguably narrow intended scope (balance-of-payments adjustments for defined crisis situations).

Why it matters:For CFOs and supply chain managers, the SCOTUS ruling creates a paradoxical operational situation: tariffs are gone in theory but the process to recover past payments is years-long and uncertain, while new tariffs arrive next week under different legal authority. Companies cannot simply celebrate the SCOTUS win and revise guidance — they must simultaneously plan for Section 122 compliance, model the refund timeline, and hedge against legal risk in both directions. This structural trade policy uncertainty, even post-SCOTUS ruling, is the primary reason today’s tariff-winner rally is incomplete relative to what would be expected from a clean, permanent tariff removal.

What to watch:Watch for the first Section 122 legal challenge to be filed — analysts expect this within 30-60 days. A court-ordered temporary stay of the Section 122 tariffs would be the next market-moving development in the tariff saga.

11. Deere & Company (DE): +11.79% | Q1 FY2026 Massive Beat — Management Calls Agriculture “Bottom of the Cycle”

The Numbers:Revenue: $9.61B vs. $7.59B est. (+27% beat); EPS: $2.42 vs. $2.02 est. (+20% beat); Equipment operations net sales: $8.0B (+17.5% YoY). FY2026 full-year net income guidance: $4.5B-$5.0B. Released: AMC Thursday, February 19.

The Problem/Win:Deere delivered its most decisive beat in recent memory, with revenue exceeding estimates by $2 billion — an extraordinary variance for a company of this scale. Management explicitly stated that 2026 represents “the bottom of the current cycle” for agriculture, with small ag equipment and construction machinery leading the recovery. CFO Josh Jepsen cited “some positive progress and momentum” in ordering trends. The breadth of the beat across both small ag, large ag, and construction removes any doubt that this was a one-segment surprise.

The Ripple:The agricultural equipment sector broadly rallied — AGCO Corporation and CNH Industrial also saw positive sympathy moves. The “cycle bottom” declaration is significant for commodity markets: if Deere is seeing demand recovery in small ag equipment, it typically precedes a pickup in farmer confidence and planting investment, which has downstream implications for fertilizer and seed companies.

What It Means:Deere’s blowout print is a rare unambiguously bullish data point in an otherwise stagflationary macro environment. A cycle bottom in agriculture argues for a multi-year recovery in capex spending by farmers — a positive for Deere, commodity chemicals, and rural economy proxies. The stock’s 12% single-day gain is well-supported by fundamentals and the guide’s strong midpoint.

What to watch:Next quarterly report in approximately May 2026 will confirm whether Q1 was the beginning of a multi-quarter recovery or a one-quarter inventory restocking event. Watch agricultural commodity prices and farm income data as leading indicators of Deere’s order book momentum.

12. Walmart (WMT): -1.38% | Q4 FY2026 Beat + $30B Buyback Overshadowed by Cautious Tariff-Driven Outlook

The Numbers:EPS: $0.74 vs. $0.73 est. (narrow beat); Revenue: $190.7B vs. $190.4B est. (narrow beat); Q4 was the quarter in which Walmart’s market cap crossed $1 trillion for the first time. $30B share repurchase program authorized (replacing 2022’s $20B program). Released: AMC Thursday, February 19.

The Problem/Win:The beat was technically positive but market participants focused on the FY2027 guidance, which reflected management’s caution about tariff-driven cost pressures and the difficult macro environment. Today’s SCOTUS ruling theoretically removes some of that headwind, but with Trump’s new 10% global tariff arriving next week, Walmart’s merchandise cost outlook remains murky. Additionally, a notable milestone went slightly against the company: Amazon, for the first time, surpassed Walmart as the world’s largest company by annual revenue ($716.9B vs. Walmart’s $713.2B), marking a symbolic shift in the retail landscape.

The Ripple:Target and Costco saw modest sympathy moves — flat to slightly lower. The “beat but cautious outlook” pattern is a signal that even the most resilient consumer discretionary companies are threading needle between demand strength and input cost headwinds. The $30B buyback is a positive capital return signal for the overall consumer sector.

What It Means:Walmart’s slight post-earnings decline despite a beat is a cautionary signal: at a $1 trillion market cap, the stock is priced for execution perfection. Any uncertainty about merchandise cost outlook — and there is significant uncertainty today — is sufficient to trigger selling. With the new Section 122 tariffs arriving next week, WMT management will need to provide an updated cost bridge before the stock can sustain upside.

What to watch:Watch Walmart’s investor day or management commentary on the Section 122 tariff impact for a revised merchandise cost and gross margin outlook. Lowe’s and TJX report next week (February 25) and will provide additional read-through on consumer and retailer health under the new tariff regime.

13. Newmont (NEM): Q4 2025 Strong Beat Paired With Costly 2026 Guidance — Production Down 10%, AISC Jumps to $1,680/oz

The Numbers:EPS: $2.52 vs. $1.81 est. (+39% beat); Revenue: $6.82B vs. $6.18B est. (+10% beat); Full-year 2025 revenue: $22.67B; Full-year 2025 profit: $7.09B ($6.39/share); 2026 guidance: production 5.3M oz (vs. 5.9M in 2025, -10%), AISC: $1,680/oz (vs. $1,358 FY2025, +24%); Quarterly dividend increased to $0.26/share (+4%). Released: AMC Thursday, February 19.

The Problem/Win:The Q4 beat was strong — a $0.71/share EPS surprise and $640M revenue beat — reflecting the benefits of gold trading well above $5,000/oz. The complication is the 2026 outlook: a 10% production decline combined with a 24% jump in all-in sustaining costs signals margin compression even at current gold prices. The AISC of $1,680/oz means Newmont needs gold to stay above approximately $2,000-2,200/oz to be profitable at historical margins, but to sustain the current valuation at $5,000/oz gold, the market expects much stronger cash flow generation than the rising cost structure allows.

The Ripple:Other gold majors — Barrick Gold and Agnico Eagle — saw mixed reactions. The sector broadly benefited from gold’s strength above $5,000, but Newmont-specific cost concerns weighed on relative performance within gold miners. The dividend increase provides floor support for income-oriented gold equity holders.

What It Means:Gold miners are not an unambiguous inflation hedge — they are subject to operational cost inflation just like any other company. Newmont’s rising AISC underscores that mine operations are becoming more expensive even as the gold price surge supports revenues. For gold equity investors, the high AISC environment argues for direct gold exposure (GLD, PHYS) over miners at current cost trajectories.

What to watch:Watch gold’s price trajectory vs. Newmont’s AISC break-even (~$1,680/oz); any pullback in gold prices to the $4,500-4,800 range would materially compress Newmont’s realized margins given the new cost structure.

Q4 2025 GDP Advance Estimate: 1.4% — Government Shutdown Subtracted 1pp, But Stagflation Risk Is Real (BEA, February 20, 2026)

What they’re saying:The Bureau of Economic Analysis released the Q4 2025 GDP advance estimate today at 1.4% annualized, versus a 3.0% consensus and a 4.4% Q3 reading. The BEA specifically estimated that the partial government shutdown (October 1 to November 12, 2025) reduced the Q4 GDP growth rate by approximately 1.0 percentage point. Full-year 2025 GDP growth came in at 2.2%, down modestly from 2.4% in 2024.

The context:The shutdown-adjusted GDP would still only be approximately 2.4%, which is not recessionary but is below the economy’s pre-COVID trend growth rate. The miss came despite positive consumer spending and business investment; the drags were government spending and net exports. The context matters for Fed policy: if the shutdown explains the bulk of the miss, the underlying economy may be healthier than the headline suggests, reducing the case for emergency rate cuts. The Atlanta Fed’s GDPNow model at 3.1% for Q1 2026 — updated today — partially supports this view, though it will be revised downward on Monday to incorporate today’s PCE data.

What to watch:First GDP revision in approximately 30 days will strip out estimation errors; watch the private-sector final sales component (GDP ex-government and inventories), which provides the cleanest signal of underlying demand.

Core PCE Hits 3.0% YoY: “Stagflationary Shadows” Challenge Fed’s 2026 Vision (BEA via FinancialContent, February 20, 2026)

What they’re saying:December 2025 core PCE (ex-food and energy) rose 0.4% month-over-month — beating the 0.3% consensus — and reached 3.0% on a year-over-year basis. This is a sharp stagnation in the disinflation trend that analysts expected to carry core PCE below 2.5% by mid-2026. The acceleration was driven by a rebound in tariff-influenced goods prices and persistent services cost inflation. Analysts at multiple institutions described today’s combined GDP/PCE release as “stagflationary shadows” entering the macro landscape for the first time since the 2022 inflation peak.

The context:The Fed currently holds the federal funds rate at 3.50-3.75% (as confirmed by the FOMC minutes released Wednesday, February 18). With core PCE at 3.0% — a full 100 basis points above target — the real federal funds rate (nominal minus PCE) is approximately 0.5-1.0%, which is not particularly restrictive. This means even if the Fed wanted to cut to support the slowing economy, it would be doing so from a starting point that is already close to neutral, with limited buffer before policy becomes outright accommodative. The “Treasury market navigating a stagflation-lite horizon” narrative (per FinancialContent) is now the base case for Q2 2026 planning.

What to watch:Next core PCE release: approximately March 13, 2026. Watch for Fed Chair Powell’s next public comments (likely at the March FOMC press conference) on whether the hot PCE data changes the Board’s characterization of inflation’s trajectory. Any softening in language from “progress toward target” to “elevated” would be meaningful.

Jobless Claims 206K: “Labor Market Defies Gravity” as Initial Claims Post Largest Weekly Drop Since November (DOL, February 19, 2026)

What they’re saying:Initial jobless claims for the week ending February 14 fell to 206,000 — down 23,000 from the prior week — and came in well below the 225,000 estimate. Bloomberg described the drop as the largest single-week decline since November 2025. Continuing claims for the week ending February 7 increased slightly to 1.869 million from 1.852 million, with the advance insured unemployment rate unchanged at 1.2%.

The context:The labor market’s resilience is simultaneously the best and most complicated news in the current macro environment. It is the best news because sub-210K initial claims means mass layoffs are not occurring — the economic pain from tariffs and AI disruption is not yet translating into widespread job losses. It is complicated because a strong labor market reduces the Fed’s justification for rate cuts, keeping borrowing costs elevated for longer. The rising continuing claims (1.869M) and four-year-high median unemployment duration suggest the “strong labor market” is increasingly characterized by slow hiring rather than low firing — a subtle deterioration in the quality of labor market resilience.

What to watch:Next initial claims: Thursday, February 26 (week ending February 21). Watch continuing claims for any acceleration above 1.9 million, which would signal the “slow hiring” dynamic is converting into a more meaningful employment softening trend.

FOMC Minutes (January Meeting): Fed Holds at 3.50-3.75%, Takes Evidence-Based Stance Ahead of Friday’s PCE (Federal Reserve, February 18, 2026)

What they’re saying:Minutes from the Federal Reserve’s January 2026 FOMC meeting, released Wednesday February 18, confirmed the committee held the federal funds rate target at 3.50%-3.75%. Members described their stance as “evidence-based” and data-dependent, acknowledging uncertainty around the trajectory of both inflation and growth. The minutes indicated the committee was monitoring Friday’s PCE release closely as a key input to the evolving policy calculus. Several members specifically noted concern about the persistence of above-target inflation in goods categories, pointing to tariff pass-through as a complicating factor in the disinflation trajectory.

The context:The minutes provided the necessary context for today’s PCE shock: the Fed was already aware that inflation risks were tilted to the upside, and the committee’s holding pattern at 3.50-3.75% reflects a deliberate choice to prioritize inflation control over growth support at this stage of the cycle. With PCE now printing at 3.0% — well above target — the bar for a rate cut at the March 18-19 FOMC meeting has effectively been raised to near-zero probability. Chair Powell’s term expires in May 2026, adding a governance uncertainty layer to the already-complex policy environment as markets wonder whether any successor would shift the committee’s inflation-fighting resolve.

What to watch:Watch for any Fed speaker commentary next week for the first real-time reaction to today’s combined GDP/PCE data. The March 18-19 FOMC meeting is the next scheduled policy decision; current market pricing implies near-zero probability of a rate cut at that meeting given today’s PCE data.

Atlanta Fed GDPNow: Q1 2026 at 3.1% — Sharp Bounce Suggests Q4 Was Idiosyncratic, Not Trend (Atlanta Fed, February 20, 2026)

What they’re saying:The Atlanta Federal Reserve’s GDPNow model, updated today February 20 with the latest data, tracks Q1 2026 real GDP at 3.1% annualized — more than double Q4 2025’s 1.4% official reading. The model’s next update is scheduled for February 24, when it will incorporate today’s PCE and GDP advance data. GDPNow is a real-time nowcast, not an official Fed forecast, and is subject to significant revision as new economic data arrives throughout the quarter.

The context:The 3.1% GDPNow estimate is both reassuring and complicated. Reassuring because it implies the economy is not in a broad structural deceleration — the Q4 weakness was likely driven primarily by the government shutdown and seasonal noise rather than a demand collapse. Complicated because: (1) a higher nominal growth rate with 3.0% inflation means real GDP growth is more modest; (2) today’s hot PCE data could cause the February 24 GDPNow update to revise lower as it implies smaller real consumption gains; and (3) the new 10% global tariff (Section 122) arriving next week introduces a new growth headwind that the model cannot yet capture.

What to watch:February 24 GDPNow update — if it falls below 2.5% after incorporating today’s PCE data and the Section 122 tariff headwind, the “soft landing” narrative takes a meaningful hit. February 24 Consumer Confidence and February 27 PPI will be the week’s key economic data releases.

• Monday, Feb 23: Durable Goods Orders (December final) and Factory Orders — Will confirm or challenge the Q4 GDP capex picture; important for understanding whether business investment deceleration is structural.

• Tuesday, Feb 24: Consumer Confidence (February) + FHFA Home Price Index (December) + Atlanta Fed GDPNow update — The Consumer Confidence print will show whether today’s hot PCE/weak GDP data is filtering into household expectations; the GDPNow revision is the first real-time impact assessment of today’s data on Q1 growth tracking.

• Wednesday, Feb 25: Nvidia (NVDA) earnings after the close — The single most consequential market event of the week. Revenue guidance and data center AI chip demand will determine whether the AI infrastructure investment cycle is intact or decelerating. Also reporting AMC: Salesforce, Lowe’s, Synopsys, TJX Companies.

• Thursday, Feb 26: Initial Jobless Claims (week ending Feb 21) — First reading that will incorporate any early Section 122 tariff announcement effects. Also reporting AMC: Dell Technologies, Block, Autodesk, Intuit.

• Friday, Feb 27: Producer Price Index (January 2026) — The second major inflation read of the week after today’s PCE shock; will frame whether producer-level inflation is still accelerating, with direct implications for the March FOMC meeting.

1. Will Nvidia’s earnings on Wednesday, February 25 confirm that AI infrastructure capex remains robust — sustaining the data center buildout that has been the primary driver of US corporate earnings growth since 2023 — or will any sign of demand softening trigger a cascading repricing across the entire AI supply chain?

2. Will Trump’s Section 122 global tariff face an immediate court challenge or temporary restraining order before it takes effect next week — and if not challenged, how will the market reprice the tariff-winner rally that lifted consumer discretionary +1.8% today once the new duties arrive?

3. With Q4 GDP at 1.4% and core PCE at 3.0% simultaneously, has the US economy entered a genuine stagflation dynamic that will force the Fed into an indefinite hold — or will the Q1 GDPNow reading of 3.1% prove that today’s GDP miss was a government-shutdown anomaly, not a trend?