Markets In Focus: The Week That Was and What’s On Tap Week-Ending 2/13/2026
The Week That Was
US equities wrapped up a choppy week ending February 13, 2026, with a modest retreat that masked some encouraging undercurrents. The S&P 500 slipped 1.4% to close near 6,836, while the Nasdaq Composite dropped 2.1%, extending its recent streak of weakness. In contrast, the Russell 2000 held up better, declining just 0.9% as small caps began to find their footing. The Invesco S&P 500 Equal Weight ETF (RSP) showed notable relative strength, underscoring a broadening of market participation beyond the usual suspects.
Key Macro Drivers
Two key reports helped steady the ship. Wednesday’s January jobs data came in stronger than anticipated, with nonfarm payrolls rising 130,000—well above forecasts—and the unemployment rate ticking down to 4.3%. Today’s CPI print was even more constructive: headline inflation cooled to 2.4% year-over-year, its lowest level in months, with core at 2.5%. Together, these figures kept rate-cut hopes alive without igniting fears of economic overheating.
Sector Shifts and Leadership
The week highlighted a clear rotation underway. Cyclicals—utilities, industrials, energy, and consumer staples—led the way, joined by small caps and value-oriented names. Laggards included technology, software, financials, and communication services, where AI-related concerns weighed heaviest.
The AI/Tech Trade Outlook
The AI trade, long the market’s darling, encountered its first sustained bout of skepticism. Fears of disruption to software models and jobs, coupled with concerns over the sheer scale of capex required, prompted a healthy rotation out of mega-caps. Cisco’s solid Q2 beat—10% revenue growth and EPS ahead of estimates—was overshadowed by in-line guidance and margin pressures tied to AI infrastructure costs. One could almost hear the collective sigh as the “arms race” narrative hit a speed bump. That said, we believe much of the pull-back in the AI tech space is overdone, and we are selectively buying and adding to high-conviction positions where fundamentals remain robust.
Portfolio Implications
For portfolios, this week’s action is a timely reminder of the enduring power of diversification. The broadening out to small caps, value, and cyclicals creates fresh opportunities to rebalance risk and capture upside as the market digests the AI story at a more measured pace.
The Week Ahead
The upcoming holiday-shortened week may lack sheer volume but not potential impact, with key inflation data, Fed insight, and a handful of heavyweight earnings likely to steer sentiment across equities, rates, and the U.S. dollar.
Macro Preview
Markets return from the Presidents’ Day pause facing a leaner but still consequential stretch of data and earnings. Wednesday’s FOMC minutes should clarify whether the January meeting’s “data-dependence” leans more hawkish or patient—an important signal for the curve after recent front-end yield drift. The Thursday release of Durable Goods Orders will test whether December’s ~5% jump in new orders was a holiday outlier or the start of a firmer capex trend; consensus expects a modest follow-through that could buoy industrials if confirmed. Friday’s Core PCE Inflation, still hovering near 2.8%, keeps the Fed’s 2% target just out of reach—a reminder that “mission accomplished” remains premature.
Earnings Spotlight
Earnings lighten but stay influential, with Coca-Cola and Walmart offering a health check on the U.S. consumer, Palo Alto Networks and Cadence reinforcing AI’s profitability narrative, Deere gauging industrial resilience, and Devon/Oxy reflecting energy discipline. Any macro surprise or cautious tone from management could stir rotation beneath the surface—an apt reminder that even in a shortened week, volatility rarely takes a holiday.
DISCLOSURES
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The S&P 500 generally represents performance of 500 large companies listed on exchanges in the U. S. It is one of the most commonly followed equity indices. The Nasdaq Composite Index is a market-weighted index that measures the performance of more than 3,000 common equities listed on the Nasdaq Composite Market. The Russell 2,000 Index is a market-cap weighted index that measures the performance of approximately 2,000 of the smallest companies in the Russell 3,000 Index. The MSCI ACWI captures Large and Mid-Cap representation across 23 Developed Markets (DM) and 24 Emerging Markets (EM) countries. With 2,921 constituents, the index covers approximately 85% of the global investable equity opportunity set. FactSet Research System is a financial data and software company that provides research for Wall Street professionals and individual investors.
