Weekly Market Commentary February 23, 2026
Week in Review
Last week’s data provided investors with a clearer sense of an economy that is still progressing but slowing at the margins, with steady activity in some areas and renewed caution in others.
Regional manufacturing surveys helped to set the tone. The Empire State Manufacturing Survey showed modest expansion with a headline reading of 7.1, above the expected reading of 6.4. This was supported by improving labor conditions and rising backlogs, even as shipments softened. The Philadelphia Federal Reserve Manufacturing Index also came in strong at 16.3 versus the 7.5 expected. This substantial outperformance indicates a strong manufacturing sector in the Philadelphia Federal Reserve district and could translate to a more resilient U.S. dollar in the coming weeks. Together, these reports indicate that early-quarter manufacturing remains stable.
Consumer sentiment provided additional context. The University of Michigan’s Consumer Sentiment Index rose to 57.3 in February, representing a modest increase from 56.4 in January of 2026. However, this is still nearly 20% below last year’s level for February. Also, year-ahead inflation expectations fell to 3.5%, while long-term expectations were up slightly to 3.4%. This suggests that households are adjusting gradually to the current price environment, even if confidence is still subdued.
Another important release was the Personal Consumption Expenditures (PCE) inflation report, which increased by 0.4% month over month. This PCE reading was hotter than expected and signaled to investors that progress on inflation remains slow. This reinforced the idea that policymakers will proceed carefully before considering adjustments to current interest rate settings.
In addition, housing starts climbed to an annualized rate of 1.48 million, and building permits rose to 1.52 million. This indicated strengthening construction activity and improving builder confidence. However, pending home sales fell by 0.8% month over month, which reflected the persistent strain caused by limited resale supply and elevated prices.
Friday brought the release of the Q4 gross domestic product (GDP) estimate, which came in at 1.4%, far below the 2.8% growth that was expected. It is important to note that this weaker reading was influenced meaningfully by the extended federal government shutdown, which lasted from early October through mid-November. When taken alongside the firm PCE reading, this soft growth figure suggests that the path toward a balanced economic environment remains uneven and that incoming data will continue to guide market expectations.
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