U.S. financial markets observed a closure on Monday in observance of the Presidents Day holiday, providing investors a brief respite to analyze recent economic data and position for a consequential, shortened trading week ahead. The pause follows a session on Friday, February 16, 2026, that saw divergent performances among major indices.
Friday's Market Recap
The Dow Jones Industrial Average concluded Friday's trading with a modest gain of 48.95 points, or 0.1%, closing at 49,500.93. In contrast, the technology-heavy Nasdaq Composite finished the day lower. This divergence reflected ongoing investor apprehension regarding artificial intelligence's disruptive potential across the technology sector. "It is a bit of good news as we head into the long holiday weekend," remarked Tim Holland, Chief Investment Officer at Orion.
The broader S&P 500 index edged up a mere 0.05%. For the week, however, all three major U.S. benchmarks recorded losses. The Dow declined 1.23%, the Nasdaq fell 2.1%, and the S&P 500 also finished lower. "Large cap tech stocks continue to be an anchor on the market," noted Michael James, Managing Director of Equity Trading at Rosenblatt Securities.
Inflation Data and Federal Reserve Policy
The latest Consumer Price Index (CPI) report provided a key data point for markets. The U.S. Labor Department reported that consumer prices increased 2.4% over the 12 months ending in January, a deceleration from the 2.7% annual rate recorded in December. The core CPI measure, which excludes volatile food and energy categories, rose 0.3% for the month and was up 2.5% year-over-year.
This cooler inflation print arrives as the Federal Reserve maintains a patient stance on monetary policy. The central bank held its benchmark federal funds rate steady within a target range of 3.5% to 3.75% at its late-January meeting. Market participants are keenly awaiting the release of the minutes from that meeting, scheduled for midweek, to gauge officials' tolerance for maintaining rates if inflation continues its downward trajectory. Futures markets currently imply approximately a 68% probability of an interest rate cut by June, with about 62 basis points of total easing priced in for the full year.
AI's Expanding Market Impact
Artificial intelligence remains a dominant thematic driver and source of volatility. Concerns have broadened beyond semiconductor and software firms, affecting a wider range of industries as investors attempt to forecast the technology's disruptive path. "It's all this whack-a-mole game," said Art Hogan, Chief Market Strategist at B Riley Wealth, describing the challenge of predicting which sector AI "is going to destroy next." This uncertainty is also influencing corporate capital expenditure plans and their subsequent effects on shareholder initiatives like stock buybacks.
Upcoming Economic and Earnings Catalysts
The holiday-shortened week features a dense calendar of high-impact events. Following the Fed minutes, Friday will bring the advance estimate for fourth-quarter Gross Domestic Product (GDP) and the Personal Income and Outlays report at 8:30 a.m. EST. The latter includes the Personal Consumption Expenditures (PCE) price index, the Fed's preferred inflation gauge.
Also on Friday, the University of Michigan will release its final February reading on consumer sentiment at 10 a.m. ET, offering a timely check on household confidence amid prevailing price and interest rate levels.
Corporate Earnings Spotlight: Walmart
On the corporate front, earnings from Dow component Walmart Inc. will command significant attention on Thursday. As a bellwether for the consumer staples sector and broader retail health, the company's results and, more importantly, its forward guidance will be closely scrutinized. Materials are expected around 6 a.m. CT, followed by a conference call at 7 a.m. CT. This report shifts focus back to fundamental questions about consumer demand in a market recently preoccupied with AI narratives.
Analysts caution that the inflation narrative remains complex. Josh Jamner, Senior Investment Strategy Analyst at ClearBridge Investments, warned that "price pressures percolating beneath the surface" could temper market optimism. He pointed specifically to a January increase in "supercore" services inflation, which excludes housing costs, as a potential concern for policymakers.
With cash markets inactive in the U.S., global trading was subdued in holiday-thinned conditions. Investors now await Tuesday's market reopen to act on this confluence of monetary policy signals, economic indicators, and corporate earnings.
