Friday, February 20th, 2026

Economic indexes had been on a roll lately, putting up better-than-expected figures on growth, productivity, employment and so on. That appears to have come to an end this morning with a slew of data on growth and consumption, and pre-market indexes moved from flattish to slightly in the red. The Dow is -86 points at this hour, the S&P 500 is -15, the Nasdaq -77 and the small-cap Russell 2000 -15 points.
 

Q4 GDP 2nd-Lowest of 2025: +1.4%

The initial print on Gross Domestic Product (GDP) for the fourth quarter of 2025 (Q4) came in at +1.4% this morning, below the +2.5% anticipated and 300 basis points (bps) lower than the final read of Q3, but still higher than the -0.6% reported for Q1. This brings the preliminary GDP growth numbers from last year to +2.3%, a smidge lower than the +2.4% for 2024 and the +3.4% reported for 2023. The longest government shutdown in U.S. history during Q4 likely took some of the gas out of this headline number.
 

PCE Warms Up in December

Related to GDP data is the Personal Consumption Expenditures (PCE) index for December — delayed from the government shutdown. Nearly across the board, we’re seeing warmer results than analysts had anticipated. Personal Income came in at +0.3%, 10 bps higher than expected but lower than the upwardly revised +0.4% for November. Personal Spending was as expected at +0.4%, equaling the upwardly revised prior month tally. “Real” Spending, adjusting for inflation, came in at +0.1%, a low not seen since September of last year.

Headline PCE month over month also reached +0.4%, warmer than the +0.3% expected and double the prior month, which had been steadily +0.2% for five straight months. Core PCE month over month — stripping out volatile food and energy expenditures — was also +0.4%, also double November.

Year over year PCE, on headline, reached +2.9%, the highest since March 2024. This metric has grown by +0.1% per month since October of last year. Clearly, this is moving the opposite direction of cooling inflation levels. Core PCE year over year came in at +3.0%, 100 bps ahead of the Fed’s inflation target, and the loftiest print since April. This is also 30 bps higher than expected and a tick higher than the upwardly revised +2.9%.

To try and sum up all these figures, economic growth seems in decent shape — so long as the government can keep from shutting down and taking upward of a full percentage point off our growth measures. Meanwhile, inflation is proving stubborn, likely due to tariff policies enacted in the first half of 2025, but staggered rather erratically throughout the 12 months (and beyond). Assuming tariff inflation is a “one-time event,” which many economists do, we may see these PCE figures begin to cool off in the coming months.
 

What to Expect from the Stock Market Today

After today’s open, we expect to see new numbers from S&P PMI: flash Services and Manufacturing for February. Last month, we saw 52.7 on Services and 52.4 on Manufacturing, both safely above the 50 threshold that determines growth from loss.

Also, the delayed New Home Sales report comes out for December, Expectations are for a similar tally, 738K seasonally adjusted, annualized units, that we saw last time around. We look for some green shoots as mortgage rates have come down from peak levels a couple years ago, but they haven’t been easy to come by so far.

Investors will also be interested in the Supreme Court’s decision, expected today, on whether President Trump’s tariff policy is constitutional. Based on precedent, it doesn’t seem likely the president has much to worry about — in rulings past during this administration, the Supreme Court has seen things Trump’s way on expanding the authority of the Executive branch, including ICE operating without judicial oversight and matters of immigration and birthright citizenship.

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