US Stock Market Weekly Review: Dow Gains, Nasdaq Lags as Inflation Cools

The U.S. stock market on February 13, 2026, exhibited divergent performance between indices, reflecting underlying sector rotations and investor sentiment shifts [0][1]. The Dow Jones Industrial Average gained 0.12% to close at 49,500.94, while the S&P 500 edged up 0.03% to 6,836.18. The Nasdaq Composite slipped 0.07% to 22,546.67, continuing its underperformance relative to other major indices [0].

However, the more significant story was the weekly performance. All three major indices suffered their worst weekly losses since November, with the Dow falling 1.23%, the S&P 500 declining 1.39%, and the Nasdaq dropping 2.1% [2][3]. This weekly weakness reflects heightened market uncertainty heading into key economic events.

Friday’s trading revealed a pronounced defensive rotation, with investors shifting away from growth-oriented technology stocks toward more stable, dividend-paying sectors:

The technology sector’s weakness, particularly in AI-related stocks, drove the Nasdaq’s underperformance. Unity Software plunged 25% this week, while Pinterest dropped 18% after missing Q4 expectations [2]. This rotation pattern suggests investors adopting a more cautious stance ahead of the Fed minutes and Walmart earnings releases scheduled for the following week.

The January CPI report delivered what analysts described as a “welcome surprise to the downside” [4]:

• Annual CPI
  : 2.4% (down from 2.7% in December)
• Monthly CPI
  : +0.2%
• Food prices
  : +0.2% monthly, +2.9% annually

This inflation easing provides some breathing room for the Federal Reserve as it navigates consumer prices still rising above the central bank’s 2% target [5]. Treasury yields fell following the report as traders priced in slightly improved odds of a Fed rate cut in coming months [5].

The Fed held rates steady at 3.50%-3.75% at their January 2026 meeting—the first of the year—after three consecutive rate cuts in the second half of 2025 [6][7]. The committee provided limited guidance on future rate decisions, leaving investors to await the Fed minutes scheduled for release on February 19.

The January jobs report demonstrated continued economic strength:

• Nonfarm payrolls
  : +130,000 jobs
• Unemployment rate
  : 4.3% (down slightly) [5][8]

This robust employment data has created mixed signals for markets, with some investors viewing the strong labor market as a reason for the Fed to delay rate cuts, while others see it as evidence of underlying economic resilience.

The market’s current dynamics reflect several interconnected factors. First, the inflation-labor market nexus creates policy uncertainty: while cooling inflation suggests the Fed could ease, strong job growth argues against immediate action. Second, the technology sector weakness appears tied to both valuation concerns following the AI rally and broader risk-off sentiment. Third, the defensive sector leadership (utilities, energy, materials) typically signals investor uncertainty about the economic outlook.

The rotation toward utilities and away from technology represents a meaningful shift in market leadership that merits attention. If sustained, this could indicate a broader market regime change from growth-dominated trading to value-oriented positioning. The AI sector selloff, exemplified by Unity Software’s 25% weekly decline, may represent either a buying opportunity for long-term investors or the beginning of a more sustained correction.

Several key events in the coming week will provide critical context for market direction:

• February 19
  : Fed Minutes release (January FOMC meeting details)
• February 20
  : Q4 GDP (advance figures)
• February 20
  : PCE Inflation data (Fed’s preferred measure)
• February 20
  : Walmart earnings (consumer health indicator)

Markets will be closed on February 17 for Presidents Day.

1. Policy Uncertainty
   : The Fed’s next moves remain unclear amid mixed economic signals, creating potential for market volatility around the February 19 minutes release
2. Technology Sector Volatility
   : Continued AI-related selloffs could spill into broader market, as evidenced by significant weekly declines in AI-adjacent stocks
3. Consumer Spending Uncertainty
   : Walmart earnings will test consumer strength amid ongoing inflationary pressures
4. Inflation Trajectory
   : While headline CPI improved, services inflation and core inflation remain sticky concerns

1. Defensive Positioning
   : The strong performance in utilities, energy, and basic materials suggests opportunities in dividend-paying defensive stocks
2. Value Rotation
   : If the rotation from growth to value sustains, value-oriented sectors may offer relative outperformance
3. Inflation Beneficiary
   : Lower inflation expectations could benefit rate-sensitive sectors like utilities and real estate

This analysis synthesizes market data from February 13, 2026, when the stock market showed mixed results with the Dow Jones gaining 0.12% while the Nasdaq declined 0.07% [0][1]. Despite Friday’s partial recovery, all three major indices recorded their worst weekly losses since November, with the Nasdaq falling 2.1% [2][3]. The January CPI report showed annual inflation easing to 2.4% from 2.7% in December, providing a positive signal for potential Fed rate cuts [4][5]. The Fed maintained rates at 3.50%-3.75% at their January meeting, with the upcoming February 19 minutes release expected to provide additional policy clarity [6][7]. Sector rotation was pronounced, with utilities surging 3.55% while technology lagged at -0.68%, reflecting investor caution heading into next week’s Fed minutes and Walmart earnings [0][2].