- Amid earnings and conferences, a packed week of macro releases could reshape the growth and inflation narratives heading into March
- Q4 GDP and PCE inflation data may test whether the bond market’s slowdown signal holds up
- FOMC Minutes, Flash PMIs, and UMich sentiment round out a pivotal stretch for policy expectations and risk assets
January Retail Sales was the big data point to kick off the holiday-shortened trading week on Wall Street… just kidding… at least it was in an alternate, non-government-shutdown universe! Alas, it appears we won’t get the first complete consumer read for a few more weeks. But that doesn’t mean there isn’t a busy data slate for the balance of this week.
Let me toss another curveball your way. Stocks are up big to start the year—international stocks, that is. The often-unsung MSCI All-Country World ex-USA Index (NASDAQ: ACWX) sports its best return relative to the S&P 500 Index (INDEXSP: .INX) in data going back to at least 1995. A three-decade alpha sprint to begin 2026 comes as the U.S. large-cap index drifted into the red YTD this past Tuesday morning. Indeed, “the stock market” is not a monolith.
Rotation Nation
Diversification and dispersion are the asset-allocation passwords at the moment. Domestic “SMID” caps have been outperforming, along with defensive sectors like Consumer Staples and the embattled Real Estate niche. Energy and Materials, presumed “late-cycle” plays, remain best among the 11 S&P 500 sectors through the year’s first 31 trading days.
And it’s that combination—defensives and late-cycle names—that makes some market technicians nervous.
Seasonal Jitters and AI’s Heel Turn
The anxiety hits during a notorious calendar period. Recall that equities topped on February 19th in 2020 and 2025. Three’s a charm if you’re a bear. Just as COVID-19 and the tariff meltdown were downside drivers in past years, a new bugaboo could be spooking investors this go-round.
Call it the “software-as-a-disservice” trade, or AI turning heel. No matter the moniker, former stalwart high-margin, high-ARR tech plays have come under attack by AI’s deflationary vigilantes. More than a handful of top holdings in the iShares Expanded Tech-Software ETF (IGV) are relegated to mid-teens P/E multiples. With valuations being halved, bottom-pickers in the institutional world may be licking their chops amid this “sell first, ask questions later” environment.
A Dangerous and Upbeat Backdrop At the Same Time?
But what changes this landscape? Well, fundamental earnings and economic data could reorient narratives and price action. Within the former category, Walmart’s (WMT) earnings report tomorrow morning, February 18, offers a consumer glimpse, but be on the lookout for AI nuggets.
You see, the now-trillion-dollar market cap company is not merely a big-box retailer—it’s an AI and automation juggernaut. John Furner succeeded former CEO Doug McMillon this month, and he may look to make a splash. What would send ripples more than insights into AI and cost-cutting efforts? We’ll be watching.
The Data Deck
And then there’s the latter category—macro data. According to our partners at Econoday, FOMC Minutes hit the tape this afternoon. The Fed is probably on hold for the duration of Chair Powell’s chairmanship, but a final rate cut before June shouldn’t be ruled out—at least according to the bond market. The 2-year Treasury yield dipped to cycle lows (back to August–September 2022) this week, suggesting that sluggish growth may pose a greater risk than hot inflation. That may sound strange (given where the Atlanta Fed’s GDPNow model has been running), but bond-market action shouldn’t be dismissed.
We’ll know more by Friday. Our economic calendar notes that a data onslaught lies ahead. Markets will absorb the first look at U.S. Q4 GDP. Expectations call for a 3.0% quarter-on-quarter annualized real growth rate, which would be a material deceleration from Q3 2025’s 4.4% scorching pace. To be clear, trade data and even gold exports continue throwing off normalized GDP figures. So, don’t be surprised if traders overlook an out-of-line headline number.
Another Inflation Test (Albeit Dated)
What may matter more is the inflation side of the Q4 report. The October through December Personal Consumption Expenditure (PCE) update will be our clearest inflation view yet (the January PCE inflation data announcement date remains TBA). With December CPI and PPI in hand, the Street sees a potentially warm year-end print.
Going forward, many economists expect a gradual easing in the inflation rate once “Liberation Day” is lapped—YoY comps turn friendlier for the inflation doves. We’ve already heard from San Francisco Fed President Mary Daly and Chicago Fed President Austen Goolsbee suggesting that rate cuts could be in the works if inflation cooperates.
Business & Consumer Touchpoints
There will be a lot to unpack at 8:30 a.m. ET before the bell on Friday, but the action continues later in the morning. At 9:45 a.m. come S&P Global Flash PMIs. With a February read, we’ll see if the latest manufacturing survey results match the surprisingly upbeat responses from the January Institute for Supply Management (ISM) Manufacturing PMI. Unlike the ISM’s version, S&P Global PMIs have been above 50 for some time. Better vibes among business owners and corporate managers could portend an improved labor market later in the year.
Finally, consumer sentiment rounds out the morning of economic data, both hard and soft. This will be the second and final update to February’s University of Michigan Surveys of Consumers. The initial report was sharply more upbeat than expected. A sanguine survey set would lend further credence to the notion of the “vibe-pression” turning a corner. The “K-shaped” economy appears full steam ahead, though.
The Bottom Line
It’s a short week for traders and portfolio managers, but a long one for those dissecting macro data points. FOMC Minutes hits before a slew of mid-tier economic updates on Thursday. Friday morning could be the big reveal, with growth and inflation numbers followed by bellwether business and consumer surveys. Through it all, corporate earnings keep rolling in, along with a very busy conference-speaking circuit.
Twitter: @ChristineLShort
The author may hold positions in mentioned securities. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
