February 2026 Market Update
A strong start and an uncertain ending
Last month gave investors plenty to weigh. Job growth held firm, and corporate earnings delivered again, particularly among AI-driven companies. But inflation ticked back up, reminding us that the Federal Reserve’s job isn’t finished. The result was stocks remaining near record highs, yet with more day-to-day volatility. It remains true that strategic investing isn’t just about timing the market; it’s also about understanding the environment. I’m here to help you make sense of the noise so you can feel confident and informed, no matter the landscape.
Below is a look at how markets performed in February, the dynamics behind the numbers, and where we are focusing our attention.
Major U.S. Stock Indices
February was a stress test for U.S. markets, with each major index responding differently to the same mix of solid growth, sticky inflation, and shifting sentiment around AI. Tech stocks, particularly software names, bore the brunt of the struggle, while the S&P 500 moved sideways and the Dow held up comparatively well. What drove that divergence was a quiet but meaningful shift in investor priorities. Capital migrated from mega-cap tech and toward industrials, materials, and consumer staples. The S&P 500 retreated 0.87%. The Nasdaq 100 led the decline at 2.32%. The Dow Jones Industrial Average finished Behind the Headlines up at 0.17%.
The Economy: Growth Holds, Inflation Lingers.
The U.S. economy started 2026 on a solid footing. January numbers, released in February, showed that the economy added 130,000 jobs, well above expectations, and the unemployment rate dipped to 4.3%. The problem is inflation. Consumer prices, producer prices, and the most recent data for the Fed’s preferred Personal Consumption Expenditures (PCE) showed the measure moved in the wrong direction, with core PCE climbing to 3.0%. Growth is holding up, but so is inflation.
The Federal Reserve: In No Rush.
With inflation picking back up and the economy still resilient, officials see no urgency to cut. For the March Fed meetings, markets are pricing a near-zero chance of an additional rate cut. Instead, markets now expect one to two modest rate cuts later in 2026, but only if inflation clearly resumes its downward trend. For now, the Fed is likely standing pat.
Stocks: Strong Earnings, More Selective Market.
The S&P 500 remains near record highs, supported by impressive earnings. Q4 2025 marked the fifth straight quarter of double-digit profit growth, and 2026 estimates call for roughly 14% more. But the market has grown more selective. Energy, materials, and industrials are leading, while AI giants like Nvidia beat expectations but saw volatile, uneven trading. The message is clear: strong earnings alone are no longer enough; sector positioning increasingly determines who wins. below 4%.
This Interest Rates: A Tale of Two Yields.
February brought an unusual dynamic in the bond market. Short-term yields edged higher as the Fed held firm, while longer-term yields actually fell, with the 10-year Treasury settling divergence reflects investor caution and demand for safety. The upside: short-term bonds and money markets can continue to offer attractive income for patient investors.
Foreign Policy: US and Israel Strike Iran.
On February 28th, the United States and Israel jointly struck Iran, with Iran responding militarily, resulting in the effective closure of the Strait of Hormuz. This action had ripple effects across the global economy, with oil prices rising and stocks falling as the conflict escalated across the region. While the long-term impacts of this action are yet to be seen, investors can expect some additional volatility as the conflict continues to unfold.
Putting It All Together
February was a reminder that even solid fundamentals can coexist with volatility. Growth and earnings remain resilient, but sticky inflation has the Fed in a holding pattern, and markets have grown more selective as a result. The end of the month presented real geopolitical instability, with potential implications for markets. As always, I’m keeping an eye on the market and am here to keep you informed about the current financial climate. If you have any questions about your portfolio or would like to talk through these shifts, don’t hesitate to reach out.
Financial Advisor
HH Financial Planning Group
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Important letters, email, or fax messages should be confirmed by calling (608) 935-7800 or (844) 544-1374. This email service may not be monitored every day or after normal business hours. The S&P 500 Index is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. The Nasdaq 100 Index is a basket of the 100 largest, most actively traded U.S. companies listed on the Nasdaq stock exchange. The index includes companies from various industries except for the financial industry, like commercial and investment banks. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The Russell 2000 Index is a stock market index that measures the performance of the 2,000 smaller companies included in the Russell 3000 Index. Citations (not included in actual email): Adinolfi, J., Wiltermuth, J., & Wang, I. (2026, February 27). Private credit, ‘cockroaches’ and the AI ‘scare trade’ hammered stocks in February. Here’s what else has investors shaken up. Morningstar.https://www.morningstar.com/news/marketwatch/20260227549/private-credit-cockroaches-and-the-ai scare-trade-hammered-stocks-in-february-heres-what-else-has-investors-shaken-up Butters, J. (2026, February 27). Earnings Insight. FactSet Research Systems Inc.https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/Earning sInsight_022726.pdf CBS News MoneyWatch. (2026, March 1). Oil prices rise after Iran attacks near Strait of Hormuz. CBS News.https://www.cbsnews.com/news/oil-prices-iran-attacks-strait-of-hormuz/ CME Group. (n.d.). CME FedWatch tool. https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html CNBC. (2026, February 25). Nvidia (NVDA) earnings report Q4 2026. https://www.cnbc.com/2026/02/25/nvidia-nvda earnings-report-q4-2026.html CNBC. (n.d.). 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Chronicle Journal.https://markets.chroniclejournal.com/chroniclejournal/article/marketminute 2026-2-27-the-great-2026-twist-us-treasury-yields-diverge-as-geopolitical-unrest-and-fed-transitions-roil-markets MarketMinute. (2026, February 27). US private employment gains for fourth consecutive week in early February: Analysis of ADP NER Pulse report. FinancialContent.https://markets.financialcontent.com/stocks/article/marketminute-2026-2-27 us-private-employment-gains-for-fourth-consecutive-week-in-early-february-analysis-of-adp-ner-pulse-report Nazareth, R. (2026, March 2). Dollar surges as traders brace for war. Yahoo Finance.https://finance.yahoo.com/news/dollar-surges-traders-brace-war-201322505.html Towfighi, J. (2026, February 27). Tech stocks tumble as markets react to latest developments. CNN Business.https://www.cnn.com/2026/02/27/investing/tech-stocks-us-markets TradingView. (2026, February 27). [Chart image]. https://www.tradingview.com/x/5z4xiobR/ TradingView. (2026, February 27). [Chart image]. https://www.tradingview.com/x/dZu84Lju/ TradingView. (2026, February 27). [Chart image]. https://www.tradingview.com/x/VuHxOEJQ/ U.S. Bureau of Labor Statistics. (2026, February 11). Employment situation news release.https://www.bls.gov/news.release/empsit.nr0.htm U.S. Bureau of Labor Statistics. (2026, February 27). Producer price index news release.https://www.bls.gov/news.release/archives/ppi_02272026.ht