Author: Montecito Capital Management
U.S. equities closed the week ending February 27, 2026 modestly higher, as investors navigated persistent inflation concerns alongside evidence that economic growth remains intact. The S&P 500 gained approximately 0.8%, the Dow Jones Industrial Average advanced 0.6%, and the Nasdaq Composite rose 1.3%, led by renewed strength in large-cap technology and AI-oriented companies. Market direction throughout the week was driven less by earnings news and more by macro data influencing expectations around Federal Reserve policy and interest rates.
The key economic release came from the Producer Price Index (PPI), which indicated inflation pressures at the wholesale level remain sticky. January producer prices rose 0.3% month-over-month and 2.0% year-over-year, slightly firmer than markets had hoped and reinforcing the view that the final leg of disinflation may prove uneven. While the report did not materially shift expectations for eventual policy easing, it contributed to continued volatility in Treasury yields as investors pushed back timelines for potential rate cuts. Labor market trends remain broadly constructive, with weekly jobless claims holding near historically low levels and employment conditions signaling moderation rather than contraction. Consumer sentiment readings also stabilized during the month, suggesting households remain resilient despite elevated financing costs and lingering inflation fatigue.
Investor sentiment reflects a market transitioning into a more fundamentally driven phase. Rather than broad risk-on positioning, capital flows remain selective, favoring companies with earnings visibility and structural growth tailwinds. Equities continue to find support from steady economic activity, but upside momentum remains constrained by uncertainty surrounding inflation persistence and monetary policy timing. As a result, markets remain highly data-dependent, with upcoming labor market and inflation reports likely to dictate near-term direction.
