Updated 3/2/2026

Our Perspective on the Markets Last Week

Markets closed out February on a softer note, and for both the S&P 500 and Nasdaq it marked the weakest month in nearly a year. The price change of select U.S. indexes for the week was: S&P 500 (-0.44%), Dow Jones Industrial Average (-1.31%), and Nasdaq (-0.95%). The 10-year Treasury note yield fell 0.11 percentage points to 3.97%.

Artificial intelligence remained at the center of attention. Nvidia’s latest results were impressive by almost any traditional measure, yet shares moved lower following the report. More notably, the strong quarter was not enough to meaningfully revive investor enthusiasm for large-cap technology. That reaction suggests the market is becoming more selective, even toward companies that continue to deliver standout growth.

According to data from FactSet, the Mag-7 cohort delivered 27.2% year-over-year earnings growth for Q4 2025, compared with a blended earnings growth rate of 9.8% for the other 493 companies in the S&P 500. That gap underscores how concentrated earnings strength remains within the index. At the same time, performance leadership has softened, with the MAGS ETF down roughly 7% year to date. In other words, fundamentals remain solid, but valuation multiples are adjusting.

Interestingly, valuation data now reflects that shift. According to Morningstar, the proportion of technology stocks trading below fair value estimates has increased meaningfully compared with last year. What had been a fully priced sector now shows a growing number of companies classified as undervalued.

Source: Morningstar

 

Block (ticker: SQ) added to the conversation late in the week after announcing an estimated 40% workforce reduction linked to AI-driven efficiencies. The headline sparked renewed selling in companies perceived to be vulnerable to AI disruption, highlighting how quickly sentiment can swing in the current environment.

On the macro front, January’s Producer Price Index rose 0.5% month over month, above expectations, reminding markets that inflation progress isn’t moving in a straight line.

Looking Ahead

The economic spotlight this week will be on Friday’s February jobs report. Economists expect the U.S. economy added roughly 60,000 jobs last month, a slowdown from January’s stronger gain. Manufacturing and labor data earlier in the week will help shape expectations heading into that report.

On the corporate front, Broadcom and Marvell Technology will provide another look at AI demand following Nvidia’s results. Earnings from Target, Costco, and other retailers will also offer insight into consumer spending trends.

Geopolitical developments in the Middle East have added another variable. The Strait of Hormuz has not been formally closed, but commercial shipping traffic has slowed significantly as vessels reroute or pause because of safety concerns. Roughly 20% of global oil flows through that corridor on a typical day, so even temporary disruption can influence energy prices and short-term market volatility. History shows that markets often react quickly to geopolitical shocks, but longer-term trends tend to be driven more by economic fundamentals than by headline risk, particularly if supply disruptions prove temporary.

This week should provide clearer signals on labor market momentum, AI leadership, consumer strength, and how markets are absorbing rising geopolitical risk as March begins.

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Probability of an interest rate change at next FOMC meeting:

DECREASE -25 bps
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No Change
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INCREASE +25 bps
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Current Target Rate is 3.50% - 3.75%

Select Economic Data Releases

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Gross Domestic Product

The economy grew at a 1.4% annualized pace in the fourth quarter despite the long federal shutdown that caused government spending to freeze.  For the full year 2025, GDP grew by 2.2%.  U.S. GDP grew at a strong 4.4% annualized rate in the third quarter of 2025, marking the fastest pace of growth in about two years, led by solid consumer spending, exports, investment, and government outlays.  The final estimate of Q2 GDP came in at an annualized rate of 3.8%, well above the initial 3.0% estimate.  The final revision showed gross domestic product shrank at a revised -0.5% annual rate in the first quarter.  More than the previous revision of -0.2%.  The final revision of Q4 2024 GDP was raised a tenth of a percent to a 2.4% annualized pace.  Q3 GDP showed the U.S. economy expanded at a frothy 3.1% annual pace in the third quarter, revised up from 2.8%.  Q2 GDP grew at a 3.0% annual pace.  Q1 2024GDP grew at a 1.4% pace due largely to much slower growth in consumer spending.  The final revision of Q4 GDP rose to 3.4%.  U.S. GDP grew at 4.9% annual pace in the third quarter.  Q2 GDP grew at a 2.1% annualized rate but consumer spending turned out to be weaker than originally reported. 

Employment Data

The February jobs report is on tap this week.  Analysts are expecting payrolls grew by 60K.  The U.S. added 130K jobs in January, while the unemployment rate held steady at 4.3%, indicating continued but moderate labor market growth.  The economy added approximately 50K jobs in December, noticeably less than the anticipated addition of 60K, but the unemployment rate unexpectedly decreased to 4.4%, suggesting that while hiring has slowed, labor conditions remain relatively stable.  The November U.S. nonfarm payrolls report showed a modest rebound in hiring with about 64K jobs added, beating expectations after an unusually large October decline of -105K, primarily driven by steep federal government job losses tied to the prolonged government shutdown.  The unemployment rate ticked up to around 4.6%, its highest in several years, signaling continued cooling in the labor market. The September nonfarm payrolls increased by 119K, while the unemployment rate rose to 4.4%, signaling modest job gains amid a cooling labor market.  Employers added a mere 22K jobs in August.  July nonfarm payrolls rose just 73K while June and May were revised significantly lower.  June payrolls were lowered to a paltry 14K from 147K and May nonfarm payrolls came down to just 19K.  April nonfarm payrolls grew by 147k. The unemployment rate held steady at 4.2%, persisting in its narrow 4.0–4.2% range—a clear indicator of a slowing, yet resilient labor market.  The U.S. added 193K jobs in March, but the unemployment rate ticked higher to 4.2%.  U.S. nonfarm payrolls increased by 151K in February and the unemployment rate ticked up to 4.1%.  Nonfarm payrolls grew by 143K in January, a significant drop from the upwardly revised December gains.  Although it was shy of the average monthly gain of 166K observed throughout 2024, the unemployment rate edged down to 4.0%.  The U.S. economy added 307K jobs in December, blowing past analysts' expectations of 160K new jobs. 

Retail Data

U.S. retail sales were flat in December (0.0% month-over-month), missing expectations and signaling softer consumer demand as households pulled back on big-ticket purchases. Year-over-year sales were up about 2.4%.  November retail sales rose about 0.6 % month-over-month, rebounding from a revised dip in October and topping forecasts.  Retail sales in the US flattened in October from September 2025, following a downwardly revised 0.1% rise in the previous period.  August retail sales rose 0.6% from July, exceeding expectations and underscoring consumer resilience.  Omitting autos and gasoline sales, a better way to measure trends in retail spending, rose an even stronger 0.7%.  July retail sales rose 0.5%, matching expectations and underscoring steady consumer demand.  June retail sales rose 0.6% month-over-month and 3.9% year-over-year, reversing two months of declines.  The May retail sales report showed a sharp -0.9% decline as sales of autos slowed by 3.5%.  Retail sales rose a scant 0.1% in April, matching the Wall Street forecast as Americans likely reduced their spending in response to tariffs.  Retail sales in the U.S. jumped 1.7% in March as shoppers sought to buy larger ticket items such as cars before tariffs could raise prices.  The February retail sales increase of 0.2% was les than anticipated, but a 1% increase in receipts from the "control group" provided some reassurance that the consumer is still solid.  Retail sales fell in January by -0.9% after consumers took a breather from holiday shopping season and a severe cold snap kept people indoors.  Sales at U.S. retailers advanced a seasonally adjusted 0.4% in December with most parts of the country reporting “strong holiday sales that exceeded expectations,” according to the Federal Reserve’s Beige Book.  For 2024, retail sales grew by 3.0%.  

Housing Data

December pending home sales report showed a notable pullback in the U.S. housing market, with the National Association of Realtors’ Pending Home Sales Index sliding 9.3% month-over-month to an index level of 71.8, the largest drop in contract activity since early 2020, and down about 3% from a year ago. New single-family home sales were essentially flat in October at about 737K units annualized, just a touch below September’s 738K but still roughly 19% higher than a year ago, suggesting steady builder demand even as closings level off.  Existing-home sales climbed about 5% to roughly 4.35M units, highlighting stronger resale market activity alongside cautious new construction. In August, new single-family home sales surged 20.5% month-over-month to an annualized pace of 800K units, reflecting a 15.4% increase year over year.  Meanwhile, existing home sales dipped slightly by -0.2% from July to a 4M unit annual rate, though they were up 1.8% from a year earlier.  New home sales in July rose to a slightly lower than anticipated 664K annualized pace and well below the July 2024 pace of 710K.  Existing-home sales rose slightly to a 4.01M annual pace in July, but remained at a relatively low level as the median price of $422,400 for an existing home still hovers near the all-time highs.  U.S. housing starts jumped by 5.2% to a seasonally adjusted annual rate of 1.43M units—boosted by increases in both single‑family and especially multifamily construction—while building permits fell by -2.8% to 1.35M units, signaling a potential slowdown in future building activity.  Sales of new single‑family homes rose modestly by 0.6% to an annualized rate of 627K units, but missed expectations of ~650K. Compared to a year ago, sales were down -6.6%.  Resales of existing homes fell -2.7% month‑over‑month to 3.93M units, the lowest pace since September 2024 and below forecasts.  The national median price hit a record $435,300.  Existing‑home sales in May increased modestly by 0.8% to a 4.03 million annualized rate—the first monthly rise in several months—and the median price rose 1.3% to $422,800, according to the National Association of Realtors.  New home sales plunged -13.7% from April to a seven-month low of just 623K with supply jumping to a 9.8‑month backlog and median prices rising about 3% year‑over‑year to $426,600.  Construction of new homes fell 9.8% in May, as builders pulled back amid waning demand from home buyers.  Housing starts fell to a 1.26M annual pace from 1.39M the previous month, the government said.  

Leading Indicators

The U.S. Leading Economic Index (LEI) fell by -0.2% in December, following the -0.3% decline in November.  The U.S. Leading Economic Index (LEI) fell by -0.5% in August.  The Conference Board Leading Economic Index (LEI) for the US was revised up to a 0.1% increase in July 2025 to 98.7 (2016=100), after declining by -0.3% in June.  The LEI fell by -2.7% over the six months between January and July 2025, a faster rate of decline than its –1.0% contraction over the previous six-month period (July 2024 to January 2025).  The Conference Board Leading Economic Index® (LEI) for the US ticked down by -0.1% in May 2025 to 99.0 (2016=100), after declining by -1.4% in April (revised downward from –1.0% originally reported).  The Leading Economic Index (LEI) for the U.S. declined by -0.7% in March to 100.5 (2016=100). The LEI in February fell by -0.2% after an upward revision in January from -0.3% to -0.2%.  The Leading Economic Indicators index rose 0.1% in December 2024 (upwardly revised from an initially estimated decline of 0.1%).  November LEI was revised up +0.4% in November. The LEI declined by -1.3% over the second half of 2024, slightly less than its -1.7% decline over the first half of 2024.  The leading index dropped -0.3% in October, largely because of higher jobless claims, fewer building permits and a decline in manufacturing orders.  The leading indicators of the U.S. economy fell -0.5% in September because of weakness in a few key industries such as housing and manufacturing, but not enough to suggest any sign of major trouble.  The leading indicators for the U.S. economy dropped -0.2% in August, the sixth consecutive decline.  The leading index for the economy fell -0.6% in July, the fifth straight monthly decline.  

Inflation

The January Producer Price Index rose 0.5% month over month, above the 0.3% consensus estimate, signaling that pipeline inflation pressures remain somewhat sticky.  The headline PCE index rose 0.3% for December and 2.5% year-over-year, while core PCE increased 0.4% on the month and 2.8% from a year earlier.  U.S. consumer prices rose 0.2% in January, while annual inflation slowed to 2.4% year-over-year from 2.7%, marking continued easing in inflation pressures. Core CPI, which excludes food and energy, increased 0.3% for the month and 2.5% annually, with shelter remaining the primary driver of price gains.  The delayed personal income and spending report showed that personal income rose by 0.1% in October and 0.3% in November, while consumer spending (PCE) increased 0.5% in both months, and the personal saving rate dipped to roughly 3.5–3.7%.  The Consumer Price Index (CPI) for December rose about 0.3% from November and 2.7% year-over-year, keeping inflation near recent trends and slightly above the Federal Reserve’s 2% goal as food and shelter costs drove much of the increase.  At the wholesale level, the Producer Price Index (PPI) for November climbed about 0.2%.  The delayed Consumer Price Index (CPI) report for November showed that headline inflation slowed to a 2.7% year-over-year pace, below economists’ expectations and down from about 3.0% in September, while core CPI (excluding food and energy) also eased to roughly 2.6%.  September PCE Price Index showed U.S. consumer-inflation rising 2.8% year-over-year and 0.3% month-to-month, while the “core” PCE (excluding food and energy) ticked down slightly to 2.8% annually.  The cost of wholesale goods and services (PPI) increased 0.3% in September.  The delayed September Consumer Price Index showed that headline inflation rose 3.0% year-over-year, slightly below expectations, signaling that price pressures continue to ease without significantly slowing economic growth.  The Personal Consumption Expenditures (PCE) price index showed annual inflation at 2.7% in August, up from 2.6% in July, while the core PCE index remained at 2.9%.  Consumer prices (CPI) rose 0.4% in August, with core CPI up 0.3%; on an annual basis, headline inflation was 2.9%, and core CPI around 3.1%.  Producer price inflation (PPI) softened in August, falling -0.1% month-over-month in August, driven by a -0.2% drop in service sector prices, even though goods prices edged up 0.1%.  On a year-over-year basis, PPI rose 2.6%.  Headline PCE inflation in July grew 2.6% over the previous 12 months, while core PCE grew at 2.9%.  Both were in-line with expectations.  Headline CPI inflation for July showed a moderate increase from June, while the year-over-year rate held at 2.7%.  Producer inflation jumped 0.9%, notching the largest price jump in three years.  PPI year-over-year climbed to 3.3% from 2.4%...a five-month high.   The PCE index rose 0.3% in July, marking the biggest increase since February.  

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