The S&P 500 Index ($SPX) (SPY) on Friday closed up +0.69%, the Dow Jones Industrial Average ($DOWI) (DIA) closed up +0.47%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.87%.  March E-mini S&P futures (ESH26) rose +0.69%, and March E-mini Nasdaq futures (NQH26) rose +0.86%.

Stock indexes recovered from early losses on Friday and rallied, with the S&P 500 and Nasdaq 100 posting 1-week highs after the Supreme Court struck down President Trump’s global tariffs.  The Supreme Court said Mr. Trump exceeded his authority by invoking a federal emergency powers law to impose his "reciprocal" tariffs as well as targeted import taxes on countries to address fentanyl trafficking.

After the Supreme Court's ruling, President Trump said he would impose a 10% global tariff under Section 122 of the Trade Act of 1974, over and above tariffs already being charged.  He declared all national security tariffs under Section 232 and existing Section 301 tariffs to be in full force and effect.  Section 122 tariffs last only 150 days, and Congress would need to approve any extension.  Section 301 tariffs require country-specific investigations that include hearings and an opportunity for input from companies or nations affected.

Stocks initially moved lower on Friday after the US Q4 GDP grew at a weaker-than-expected pace.  Also, signs of stubborn inflation pressures may keep the Fed from cutting interest rates after the Dec core PCE price index, the Fed's preferred inflation gauge, rose more than expected.  In addition, US manufacturing activity slipped after the Feb S&P manufacturing PMI unexpectedly declined.

Geopolitical risks are bearish for stocks.  President Trump on Thursday ramped up pressure on Iran to strike a deal over its nuclear program, saying he thought 10 to 15 days was “pretty much” the “maximum” he would allow for negotiations to continue, and “We’re either going to get a deal, or it’s going to be unfortunate for them.” 

US Q4 GDP rose +1.4% (q/q annualized), weaker than expectations of +2.8%.  The Q4 core PCE price index rose +2.7%, stronger than expectations of +2.6%.

US Dec personal spending rose +0.4% m/m, stronger than expectations of +0.3% m/m.  Dec personal income rose +0.3% m/m, right on expectations.

The US Dec core PCE price index (the Fed's preferred inflation gauge) rose +0.4% m/m and +3.0% y/y, stronger than expectations of +0.3% m/m and +2.9% y/y.

The US Feb S&P manufacturing PMI fell -1.2 to 51.2, weaker than expectations of no change at 52.4.

US Dec new home sales fell by -1.7% to 745,000, better than expectations of 730,000. 

The University of Michigan US Feb consumer sentiment index was revised lower by -0.7 to 56.6, weaker than expectations of no change at 57.3.

The University of Michigan US Feb 1-year inflation expectations were revised lower to a 13-month low of 3.4% from the previously reported 3.5%. The Feb 5-10 year inflation expectations were revised lower to 3.3% from the previously reported 3.4%.

Hawkish comments on Friday from Atlanta Fed President Raphael Bostic were negative for stocks when he said it's prudent to have interest rates mildly restrictive, as he expects US growth in 2026 to put upward pressure on inflation.

Q4 earnings season is nearing its end, with more than three-quarters of the S&P 500 companies having reported earnings results.  Earnings have been a positive factor for stocks, with 74% of the 427 S&P 500 companies that have reported beating expectations.  According to Bloomberg Intelligence, S&P earnings growth is expected to climb by +8.4% in Q4, marking the tenth consecutive quarter of year-over-year growth.  Excluding the Magnificent Seven megacap technology stocks, Q4 earnings are expected to increase by +4.6%.

The markets are discounting a 5% chance for a -25 bp rate cut at the next policy meeting on March 17-18.

Overseas stock markets settled mixed on Friday.  The Euro Stoxx 50 rallied to a new all-time high and closed up +1.18%.  China’s Shanghai Composite is closed for the week-long Lunar New Year holidays.  Japan’s Nikkei Stock 225 closed down -1.12%.

Interest Rates

March 10-year T-notes (ZNH6) on Friday closed down by -1 tick.  The 10-year T-note yield rose +1.2 bp to 4.079%.  T-notes posted modest losses on Friday after the Dec core PCE price index, the Fed's preferred inflation gauge, rose more than expected, a hawkish factor for Fed policy.  T-notes fell to their lows on Friday after the Supreme Court struck down President Trump's global tariffs, as the removal of the tariff revenue will boost the US budget deficit.  However, prices recovered after Mr. Trump said he would impose a 10% global tariff under Section 122 of the Trade Act of 1974, over and above tariffs already being charged.

Losses in T-notes were also limited after Q4 GDP expanded less than expected and the Feb S&P manufacturing PMI unexpectedly declined. In addition, the downward revision to the University of Michigan US Feb inflation expectations was supportive for T-notes. 

European government bond yields moved lower on Friday.  The 10-year German bund yield fell -0.5 bp to 2.737%.  The 10-year UK gilt yield matched a 14-month low of 4.336% and finished down -1.5 bp to 4.353%.

Eurozone Feb S&P manufacturing PMI rose +1.3 to 50.8, stronger than expectations of 50.0 and the fastest pace of expansion in 3.5 years.

German Jan PPI fell -3.0% y/y, weaker than expectations of -2.2% y/y and the largest decline in 1.75 years.

UK Feb S&P manufacturing PMI unexpectedly rose +0.2 to 52.0, stronger than expectations of a decline to 51.5 and the highest level in 1.5 years.

UK Jan retail sales excluding auto fuel rose +2.0% m/m, stronger than expectations of +0.3% m/m and the largest increase in 20 months.

Swaps are discounting a 2% chance of a -25 bp rate cut by the ECB at its next policy meeting on March 19.

US Stock Movers

The strength in the Magnificent Seven technology stocks provided support to the broader market.  Alphabet (GOOGL) closed up more than +4% to lead gainers in the Nasdaq 100, and Amazon.com (AMZN) closed up more than +2% to lead gainers in the Dow Jones Industrials.  Also, Nvidia (NVDA), Meta Platforms (META), and Apple (AAPL) closed up more than +1%.  Bucking the trend, Tesla (TSLA) fell -0.03%, and Microsoft (MSFT) fell -0.30%.

Chipmakers and AI-infrastructure stocks moved higher on Friday, lifting the overall market.  Lam Research (LRCX) closed up more than +3%, and Micron Technology (MU) and Analog Devices (ADI) closed up more than +2%.  Also, Applied Materials (AMAT), KLA Corp (KLAC), and Qualcomm (QCOM) closed up more than +1%.

Shares of asset managers retreated on Friday after Blue Owl Capital announced it would restrict withdrawals from one of its retail-focused private credit funds.  Ares Management (ARES) closed down more than -5%, and Blue Owl Capital (OWL) closed down more than -4%, adding to Thursday’s -5% decline.  Also, Blackstone (BX) closed down more than -3%. 

Cybersecurity software stocks fell on Friday after Anthropic PBC introduced a new security feature into its Claude AI model that “scans codebases for security vulnerabilities and suggests targeted software patches for human review.” Cloudflare (NET) closed down more than -8%, and CrowdStrike Holdings (CRWD) closed down more than -7% to lead losers in the Nasdaq 100.  Also, Zscaler (ZS) closed down more than -5%, and MongoDB (MDB) closed down more than -3%.  

RingCentral (RNG) closed up more than +32% after reporting Q4 adjusted EPS of $1.18, better than the consensus of $1.13, and forecasting full-year adjusted EPS of $4.76 to $4.97, stronger than the consensus of $4.73.

Corning (GLW) closed up more than +7% to lead gainers in the S&P 500 after UBS raised its price target on the stock to $160 from $125.

Comfort Systems USA (FIX) closed up more than +6% after reporting Q4 revenue of $2.65 billion, above the consensus of $2.34 billion.   

Floor & Decor Holdings (FND) closed up more than +4% after reporting Q4 adjusted EPS of 36 cents, better than the consensus of 34 cents. 

Live Nation Entertainment (LYV) closed up more than +3% after reporting Q4 revenue of $6.31 billion, stronger than the consensus of $6.11 billion.

Workiva Inc (WK) closed up more than +3% after forecasting full-year total revenue of $1.04 billion, above the consensus of $1.02 billion. 

GRAIL Inc (GRAL) closed down more than -50% after it said its multi-cancer screener failed to meet its primary endpoint of a statistically significant reduction in combined Stage III and IV cancer.

Akamai Technologies (AKAM) closed down more than -14% to lead losers in the S&P 500 after forecasting full-year adjusted EPS of $6.20 to $7.20, well below the consensus of $7.35. 

Copart (CPRT) closed down more than -3% after reporting Q2 revenue of $1.12 billion, weaker than the consensus of $1.17 billion.

Newmont (NEM) closed down more than -2% after forecasting its 2026 gold production will fall about -10% to 5.3 million ounces. 

Walmart (WMT) closed down more than -1% after HSBC downgraded the stock to hold from buy.

Earnings Reports(2/23/2026)

Diamondback Energy Inc (FANG), Dominion Energy Inc (D), Domino's Pizza Inc (DPZ), Erie Indemnity Co (ERIE), Keysight Technologies Inc (KEYS), ONEOK Inc (OKE).

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