Markets Weekly Outlook: Supreme Court Tariff Decision and Tech Sector Rotation

This analysis is based on the Seeking Alpha article [1] published on February 14, 2026, covering market developments through mid-February 2026. The article provides a comprehensive weekly market outlook centered on two major themes: the approaching Supreme Court decision on President Trump’s tariffs and the significant rotation away from technology and software stocks that has persisted since October 2025. The timing is particularly significant given that the Supreme Court has scheduled February 20, 2026, as its next opinion day for the tariff case, with additional sessions on February 24 and 25 [2][3].

The article’s observation that “productivity gains by AI are now turning into fears of destruction for many firms, industries, and their components” captures a critical market sentiment shift that has driven substantial sector rotation in recent months. Tech and software sectors have been “straight-up bleeding since October,” representing a significant trend reversal from the AI-driven rally that characterized much of 2025.

The market data reveals significant volatility in early February 2026, with a sharp decline on February 12 followed by a rebound attempt on February 13. On February 12, 2026, markets experienced sharp declines: the S&P 500 fell 1.79%, the NASDAQ dropped 2.36%, and the Russell 2000 declined 2.58% [0]. However, a recovery emerged on February 13, with the S&P 500 essentially flat (+0.03%), the NASDAQ recovering slightly (-0.07%), and the Russell 2000 posting a 1.01% gain [0]. This pattern aligns with the article’s observation that “most of the assets that got beaten down last Friday attempted a rebound in this week’s action.”

The sector performance data clearly illustrates the ongoing rotation dynamics [0]:

This data confirms the article’s characterization of technology as experiencing sustained decline. The Technology sector ranks as the worst performer, while defensive sectors like Utilities and Consumer Defensive are leading gains—a classic risk-off rotation pattern that typically emerges when investors anticipate economic uncertainty or seek safer havens.

The Technology Select Sector SPDR (XLK) has experienced a 4.17% decline over the past 30 trading days, falling from $145.63 to $139.56 [0]. The period high was $149.90 with a low of $135.07, representing a 10% price range. The 20-day moving average stands at $143.26, suggesting the sector is trading below its recent average—a technical indicator that could signal continued weakness in the absence of positive catalysts [0].

The Supreme Court’s upcoming decisions on tariffs represent a critical binary event for financial markets. The Court has scheduled February 20, 2026, as its next opinion day, with additional sessions on February 24 and 25 [2][3]. This decision could potentially invalidate most of President Trump’s signature tariffs, representing a significant policy inflection point.

The financial stakes are substantial. Tariff collections have surged 304% year-over-year to $124 billion YTD, with January 2026 collections reaching $30 billion in customs duties [4]. A ruling against the tariffs could provide meaningful consumer relief and significantly impact inflation expectations [5]. The market is closely watching this decision as it could reshape trade policy, consumer prices, retail margins, and the overall inflation outlook for 2026.

The uncertainty surrounding this decision contributes to current market volatility, as investors position for multiple potential outcomes. A full invalidation would likely benefit consumer-facing companies and imports-dependent industries, while companies that have benefited from tariff protection could face headwinds.

The article’s observation about AI productivity gains turning into “fears of destruction” reflects a significant shift in market sentiment toward the software sector. According to CNBC [6], software executives note that “AI is causing every software company to have to stay on its toes,” indicating the pervasive uncertainty about how AI will reshape competitive dynamics.

However, some Wall Street analysts see opportunity in this weakness. Morgan Stanley has identified nine AI-hit software stocks trading at a discount, arguing that “fears around generative AI disruption have gone too far” [7]. Bloomberg reports that “software stocks trade at bargain bin prices after AI-fueled drop,” with some market professionals expecting a rebound citing solid fundamentals [8]. This divergence between bearish market sentiment and fundamental analyst assessments represents a key point of tension that will likely be resolved through upcoming earnings seasons.

The current market environment reflects the intersection of multiple powerful forces: (1) policy uncertainty from the pending Supreme Court tariff decision, (2) sector rotation driven by AI disruption fears, and (3) technical momentum factors following the October 2025 market peak. These factors combine to create a complex landscape where traditional defensive sectors outperform while growth-oriented technology names experience sustained pressure.

The rotation from Technology to Utilities represents more than just a short-term risk-off trade—it may reflect a more fundamental reassessment of growth expectations in an environment where AI productivity gains create competitive uncertainty for established software companies. The 304% surge in tariff collections [4] adds another layer of complexity, as these costs ultimately flow through to consumers or get absorbed by company margins, affecting both inflation expectations and corporate earnings outlooks.

The current sector rotation pattern suggests that market participants are pricing in elevated uncertainty regarding the economic outlook. The combination of tariff policy uncertainty and AI-driven competitive disruption creates a double-blind environment where traditional growth metrics may be insufficient for valuation purposes.

The divergence between technical weakness in technology stocks and some analysts’ fundamental positive outlook [7][8] indicates that the market may be overreacting to AI disruption fears in the short term. However, the depth and persistence of the rotation since October suggests that this may represent a more sustained shift in market leadership rather than a temporary correction.

1. Tariff Decision Volatility
   : The Supreme Court ruling represents a binary event with significant implications. A negative ruling could trigger substantial market volatility across multiple sectors, particularly those reliant on imported goods. Alternatively, a ruling upholding the tariffs could maintain current market dynamics.

2. Technology Sector Momentum
   : The sustained decline in tech stocks since October 2025 could continue if AI disruption fears intensify. The sector is trading below its 20-day moving average [0], which could signal potential for further downside in the absence of positive catalysts.

3. Inflation Exposure
   : If tariffs are upheld, continued elevated tariff collections could maintain inflationary pressures, limiting Federal Reserve flexibility and affecting interest rate expectations.

4. Sector Correlation Risks
   : The current rotation from growth to defensive sectors may accelerate if economic uncertainty increases, potentially creating valuation dislocations in both directions.

1. Value Opportunities in Software
   : As Morgan Stanley notes [7], some AI-hit software stocks may be trading at discounts that do not reflect fundamental values. The upcoming earnings season will be critical in determining whether AI fears are justified or overblown.

2. Defensive Positioning
   : The current risk-off environment favors defensive sectors, which may continue to outperform if uncertainty persists through the Supreme Court decision period.

3. Policy Arbitrage
   : Depending on the Supreme Court ruling outcome, significant sector-specific opportunities may emerge from the resulting policy shifts.

The analysis synthesizes market data, technical indicators, and external sources to provide a comprehensive view of current market conditions. Key findings include:

• Technology sector ranks as worst performer (-0.68%) while Utilities leads (+3.55%) [0]
• XLK has declined 4.17% over 30 trading days, trading below its 20-day moving average of $143.26 [0]
• Supreme Court tariff decision scheduled for February 20, 24, and 25 [2][3]
• Tariff collections surged 304% YoY to $124 billion YTD [4]
• Some analysts see value opportunities in AI-hit software stocks [7][8]

This information is provided for informational purposes to support decision-making and does not constitute investment advice. The combination of elevated valuations in defensive sectors, depressed technology valuations, and pending Supreme Court decisions creates a complex environment requiring careful position sizing and risk management.