U.S. equities moved lower last week as investors grappled with mounting concerns about the broader economic impact of artificial intelligence, pressuring stocks across multiple sectors. The technology-heavy Nasdaq Composite fell 2.10%, while the S&P 500 and Dow Jones Industrial Average declined 1.39% and 1.23%, respectively. Despite this cautious sentiment, many of the software companies most closely associated with AI-related disruption delivered quarterly results that topped consensus expectations, prompting analysts to raise forward earnings estimates. At the same time, hyperscale cloud providers once again outlined capital spending plans that exceeded forecasts, signaling continued aggressive investment in AI infrastructure. The backdrop was further complicated by a heavy slate of economic releases, including data on consumer spending, employment trends, and inflation, which offered a mixed, at times uneven, view of underlying economic momentum, contributing to the cautious tone in markets. Last week, the 10-year Treasury yield fell 17 basis points, closing at 4.05%.

U.S. & Global Economy

• Last week was busy with economic data releases. U.S. employers added 130,000 jobs in January, well above expectations and the strongest gain in over a year, while the unemployment rate edged down to 4.3%, signaling continued labor market resilience despite sizable downward revisions to the prior year’s job growth. Weekly jobless claims also fell modestly, reinforcing the view that the labor market is cooling, not crashing. The stronger-than-expected employment data tempered expectations for near-term Federal Reserve rate cuts, with markets raising the odds that rates will remain unchanged through midyear. Meanwhile, inflation continued to cool, as headline CPI rose 0.2% month-over-month and 2.4% year-over-year, aided by lower energy prices, though core inflation ticked slightly higher. Consumer spending showed signs of moderation, with retail sales flat for the month and control group sales declining, suggesting that overall economic momentum may be slowing.

Policy and Politics

• The U.S. political scene saw a host of high-profile developments on both the domestic and international fronts last week. On the regulatory side, the administration rolled back the 2009 EPA “Endangerment Finding,” removing a key basis for federal vehicle greenhouse gas standards. International tensions also rose as the U.S. sent a second aircraft carrier, the USS Gerald R. Ford, to join the USS Abraham Lincoln in the Middle East to increase pressure on Iran amid stalled nuclear talks and ongoing strategic competition in the region. In economic diplomacy, the U.S. struck a trade agreement with India that will lower reciprocal tariffs to about 18% and was announced alongside claims that New Delhi will reduce its Russian oil imports in exchange for trade benefits. Back home, domestic politics were tense, with the Department of Homeland Security entering a partial shutdown on February 14 after Senate negotiations broke down over immigration enforcement reforms.

This week, investors will be focused on key economic data, including Q4 GDP and the December PCE index, which will provide insights into growth and inflation trends. Earnings results are expected from major companies such as Walmart, John Deere, Booking Holdings, Palo Alto Networks, and Analog Devices, offering a window into both consumer spending and technology trends. The release of the Federal Reserve’s January FOMC minutes and scheduled speeches from Fed officials will also draw attention, providing additional clues about policymakers’ views on inflation, growth, and future interest rate decisions. While near-term market movements may continue to reflect sector rotations, our view remains that the long-term growth story behind AI is intact, supporting a favorable outlook for U.S. large-cap stocks. At the same time, the recent rotation into value-oriented sectors highlights the ongoing importance of maintaining a diversified portfolio. As always, the team at Valley National Financial Advisors is here to help you navigate these developments and answer any questions you may have.

Economic Numbers to Watch This Week

• Empire State Manufacturing Survey for February 2026, prior 7.7
• Home Builder Confidence Index for February 2026, prior 37
• Durable-Goods Orders for December 2025, prior 5.3%
• Initial Jobless Claims for week ending February 14, 2026, prior 227,000
• Leading Economic Index for December 2025, prior -0.3%
• GDP for Q4 2025, prior 4.4%
• PCE Index for December 2025, prior 0.2%
• S&P Flash U.S. Services PMI for February 2026, prior 52.7
• S&P Flash U.S. Manufacturing PMI for February 2026, prior 52.4
• New Home Sales for November 2025, prior 737,000
• Consumer Sentiment (Preliminary) for February 2026, prior 57.3

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