Market Summary
February brought another month of volatility within roughly the same trading ranges as investors balanced moderating inflation data with rising geopolitical risks and growing concerns about the labor market. Equity markets moved unevenly during the month, with technology stocks facing periodic selling pressure while energy shares rallied alongside rising oil prices. Markets were also influenced by a combination of economic releases and Federal Reserve commentary suggesting policy may remain restrictive for longer than previously expected. The S&P lost -0.86% for the month, the Nasdaq was hit the hardest losing -2.32 %, while the Russell 2000 actually posted a modest gain of 0.71%. (1)
Middle East Tensions
The biggest news worldwide to come out of February was the beginning of the Iran war. The biggest risks for the markets will likely be longer term and mainly focuses on inflation. Oil prices have risen more than 30% since the war began. This dramatically raises the cost of shipping meaning the rise in the price of oil impacts virtually all shipped goods across the world. These prices are generally pushed onto the consumer. Another factor is shipping restrictions within the region being altered. Of course, the main underlying factor will be how long the war continues, which is unclear at the moment.
Economic News & Releases
Inflation data released during February showed modest improvement but continued to indicate that price pressures remain above the Federal Reserve’s long-term target. The January Consumer Price Index rose slightly less than economists expected, suggesting progress on inflation, though underlying price pressures in services remain persistent. At the same time, market participants continued to focus on the Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) index, which remains elevated relative to the Fed’s 2% target. (2)
Business activity data also provided mixed signals. While certain sectors continued to show resilience, economists noted that employment growth has slowed considerably compared with the decade preceding the pandemic, suggesting the economy may be entering a slower expansion phase. (3)
Labor Market
One of the bigger headlines for the markets occurred last Friday. The most recent labor data showed Nonfarm payrolls decreased 92,000 in February with almost all areas of employment declining and the unemployment rate rose to 4.4%, marking one of the largest monthly employment declines since the pandemic. Economists noted broader weakness in several sectors including information services, transportation, and construction. While a single month of data does not establish a trend, the report highlighted the delicate balance policymakers face as they attempt to slow inflation without significantly weakening the labor market. (4)
Looking Forward…
Overall, February reflected a market environment still searching for direction as investors weighed slowing economic momentum against the possibility of monetary policy easing later in the year. We continue to believe this market will be headline-driven with intraday and overnight volatility remaining high into this spring.
Citations:
1. Schwab Feb 27, 2026
2. Reuters Feb 13, 2026
3. Reuters Feb 09, 2026
4. Reuters Mar 06, 2026
Disclaimers:
This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Bob Lawson is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
