U.S. equity and Treasury markets observed a closure on Monday in observance of the Presidents Day holiday, leading to subdued activity in index futures. The S&P 500 futures contract edged 0.1% higher, hovering near the 6,853 level in thin trading conditions, following a week characterized by volatility driven by shifting narratives around artificial intelligence.
Focus Shifts to Economic Catalysts
With cash markets quiet, investor focus has turned to a shortened trading week packed with significant economic and corporate catalysts. The key events include the release of the personal consumption expenditures (PCE) price index—the Federal Reserve's preferred inflation gauge—and an advance reading on fourth-quarter gross domestic product (GDP), both scheduled for Friday. Additionally, retail giant Walmart is set to report earnings, offering a crucial read on consumer health.
Art Hogan, chief market strategist at B. Riley Wealth, characterized the recent market dynamic as a "whack-a-mole game," where AI-driven narratives are impacting different industry sectors in rapid succession.
Prior Session Recap and Tech Pressure
The last cash trading session on Friday concluded with mixed results. The Dow Jones Industrial Average gained 0.10% to close at 49,500.93, while the S&P 500 added a modest 0.05% to finish at 6,836.17. The Nasdaq Composite bucked the trend, slipping 0.22% to 22,546.67. Market participants had initially drawn optimism from cooler-than-expected January inflation data, which nudged up odds for a potential Federal Reserve interest rate cut in June.
However, pressure on large-cap technology stocks acted as an anchor on broader market gains. "Large cap tech stocks continue to be an anchor," noted Michael James, managing director at Rosenblatt Securities. Concerns are mounting among investors regarding whether massive capital expenditures on AI infrastructure will yield returns quickly enough. This skepticism has weighed heavily on sector leaders year-to-date; Microsoft shares are down approximately 17%, while Amazon has declined nearly 14% as the market shifts its focus from long-term AI promises to nearer-term earnings visibility.
Holiday Liquidity Impacts Broader Assets
The reduced liquidity typical of a U.S. market holiday was evident across other asset classes. Gold prices slid more than 1% on Monday as the U.S. dollar strengthened. Analysts noted the precious metal was range-trading, with UBS analyst Giovanni Staunovo commenting, "Gold is range-trading around $5,000/oz in a week with lower liquidity due to holidays."
Upcoming Economic Calendar
The economic docket for the latter part of the week is densely packed. According to the Bureau of Economic Analysis, Thursday will see the release of the U.S. international trade report for December. Friday morning at 8:30 a.m. ET brings a dual release: the advance estimate of fourth-quarter and full-year 2025 GDP, alongside the December personal income and outlays report, which contains the critical PCE inflation figures.
Also on Friday, the University of Michigan is scheduled to publish its final February consumer sentiment reading at 10 a.m. ET. This survey is a closely watched indicator of household confidence and inflation expectations. Some calendar uncertainty remains following recent disruptions; the Census Bureau has listed the release date for the January 2026 advance monthly retail trade report as "to be announced."
Market Risks and Broader Context
The primary downside risk for equities this week is straightforward: if the GDP and PCE inflation data come in hotter than anticipated, traders may further delay expectations for Federal Reserve rate cuts. This could revive pressure on interest-rate-sensitive segments of the market. Separately, fears of AI disruption, which originated in the software sector, have begun to spread to other industries perceived as vulnerable to automation, potentially broadening the scope of any market sell-offs.
Energy markets also present a variable, with Brent crude rising 41 cents to $68.16 a barrel and U.S. West Texas Intermediate gaining 43 cents to $63.32 in subdued trade ahead of U.S.-Iran nuclear talks.
When Wall Street reopens on Tuesday, the overarching themes for the week will be parsing the resilience of the American consumer and assessing whether inflation is cooling at a pace sufficient to keep the prospect of rate cuts alive. The next significant tests arrive on Friday with the trio of U.S. GDP, personal spending and inflation data, complemented by the Michigan sentiment survey.
