February Market Recap
Major changes in US policy led to a change of direction in financial markets last month.
The S&P 500 shed 1% in February and the tech-heavy NASDAQ lost more than 3% as investors digested the news that President Trump’s signature economic policy (tariffs) was deemed unlawful by the US Supreme Court. The month also ended with America entering a war against Iran. The Dow Jones Industrial Average managed a meager gain to climb higher for the 10th month in a row.
Growing expectations of a new military conflict in the Middle East led oil prices higher last month. Utilities (+9.9%), Energy (+8.8%) and Materials (+8.3%) were the market’s best-performing sectors. It was an especially large spread from there to the four sectors that finished negative: Consumer Discretionary (-5.4%), Communication Services (-5.1%), Technology (-4%), and Financials (-3.8%).
Benchmark Returns: February 2026 | YTD 2026
|
Dow Jones
|
S&P 500
|
NASDAQ
|
+0.17% | +1.90%
|
-0.87% | +0.49%
|
-3.38% | -2.47%
|
|---|
The Supreme Court on February 20 reaffirmed lower court decisions that the authority to implement broad tariffs on imported goods lies with Congress, not the president. This legal decision invalidates the majority of tariffs implemented by Trump over the last 12 months, although the president immediately indicated that he intends to impose similar tariffs (potentially) authorized by separate legal statutes.
On one hand, the Court’s ruling will have limited legal and financial consequences. The US government, for example, has no plans to repay the estimated $170 billion of tariffs already collected from US companies. It does, however, cast another layer of uncertainty on both US domestic and foreign policy. The use (or threat) of tariffs was at the center of Trump’s trade deals. Many of those could now be renegotiated or torn up entirely. In the meantime, financial markets are left to make sense of a murkier road ahead.
Investors continued to pull money away from the Mag 7 technology companies in February. Two months into 2026, Tech has been the second-worst sector in the S&P 500 in terms of year-to-date returns. This pivot seems to confirm we have entered a new chapter in the A.I. saga.
Many software stocks suffered big losses in February based on fears that A.I. will replace traditional “software as a service” business models. The selloff was triggered by the release of a new legal tool from Anthropic, a San Francisco-based A.I. company. These waves of selling will create buying opportunities, but market conditions around Tech and A.I. remain volatile.
None of that has stopped Mag 7 companies from continuing to spend big on A.I. infrastructure. Late in February, private company OpenAI reportedly secured $110 billion in a new round of financing that includes major investments from Amazon ($50 billion) and Nvidia ($30 billion).
With fourth-quarter earnings season nearly complete, S&P 500 companies grew earnings by 14.2% from a year earlier. It is the fifth consecutive quarter in which S&P companies delivered double-digit earnings growth. It is also well above the consensus 8.3% growth that was forecast in late December.
The US economy grew 1.4% annualized during Q4 2025 according to the initial estimate released in February by the US Bureau of Economic Analysis. This represents slower-than-expected growth, although some of the lag can be attributed to lower government spending from the 43-day federal shutdown in October and November.
The latest employment data showed 130,000 jobs added in January, the majority of those in healthcare and construction. There was no meeting of the Federal Reserve’s Open Market Committee in February. Jerome Powell will preside over its next meeting March 17-18.
International equities have enjoyed a strong start to the year. Non-US Developed Markets increased 4.6% in February. Emerging Markets were up 5.9%. Small cap US stocks, as measured by the Russell 2000, gained 0.7%, slightly outperforming US large-caps.
The yield on 10-year US Treasury bonds fell meaningfully in February, ending the month at 3.96% (down from 4.24% a month earlier).
The US stock market had already closed for the month by the time the US Air Force carried out its first strikes in Iran over the weekend. Stock futures traded roughly 1% lower heading into the first day of March trading, but equities recouped those losses relatively quickly.
Ben Marks
Chief Investment Officer
Brett Angel
Senior Wealth Advisor
Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.
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