Stocks Settle Higher on Signs of US Economic Strength

The S&P 500 Index ($SPX) (SPY) on Wednesday closed up +0.56%, the Dow Jones Industrial Average ($DOWI) (DIA) closed up +0.26%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.80%.  March E-mini S&P futures (ESH26) rose +0.52%, and March E-mini Nasdaq futures (NQH26) rose +0.80%.

Stock indexes settled higher on Wednesday, as solid US economic data indicate a resilient economy.  Wednesday’s reports on Dec capital goods new orders, Dec housing starts and building permits, and Jan manufacturing production were better-than-expected and bullish for stocks.  Also, AI jitters temporarily eased, lifting chipmakers and software stocks.  After months of gains in technology stocks fueled by AI optimism, equity markets have turned cautious amid doubts that heavy spending will yield meaningful returns or that new AI tools will disrupt many sectors of the economy, including finance, logistics, software, and trucking. 

However, stocks fell back from their best levels on Wednesday as bond yields rose on the hawkish minutes of the Jan 27-28 FOMC meeting, where “several” policymakers suggested the Fed may need to raise interest rates if inflation stays above their goal.  The minutes stated that "Several participants indicated that they would have supported a two-sided description of the FOMC's future interest rate decisions, reflecting the possibility that upward adjustments to the target range for the federal funds rate could be appropriate if inflation remains at above-target levels."

US MBA mortgage applications rose +2.8% in the week ended February 13, with the purchase mortgage sub-index down -2.7% and the refinancing mortgage sub-index up +7.1%.  The average 30-year fixed rate mortgage fell -4 bp to 6.17% from 6.21% in the prior week. 

US Dec capital goods new orders nondefense ex-aircraft and parts (a proxy for capital spending) rose +0.6% m/m, stronger than expectations o +0.3% m/m.

US Dec housing starts rose +6.2% m/m to a 5-month high of 1.404 million, stronger than expectations of 1.304 million.  Dec building permits (a proxy for future construction) rose +4.2% m/m to a 9-month high of 1.448 million, stronger than expectations of 1.400 million.

US Jan manufacturing production rose +0.6% m/m, stronger than expectations of +0.4% m/m and the biggest increase in 11 months.

The market’s focus this week will be on corporate earnings results and economic news.  On Thursday, initial weekly unemployment claims are expected to decline by -2,000 to 225,000.  Also, the Feb Philadelphia Fed business outlook survey is expected to fall by -4.8 to 7.8.  In addition, the Dec trade deficit is expected to narrow to -$55.5 billion. Finally, Jan pending home sales are expected to increase by +2.0% m/m.  On Friday, Q4 GDP is expected to expand by +3.0% (q/q annualized), and the Q4 core price index is expected to climb by +2.6%.  Also, Dec personal spending is expected to rise by +0.4% m/m and Dec personal income is expected to be up +0.3% m/m.  In addition, the Dec core PCE price index (the Fed’s preferred inflation gauge) is expected to be up +0.3% m/m and +2.9% y/y.  The Feb S&P manufacturing PMI is expected to slip by -0.1 to 52.3, and Dec new home sales will be released.  Finally, the University of Michigan Feb consumer sentiment index is expected to be revised lower to 57.2 from 57.3.

Q4 earnings season is nearing its end, with more than three-quarters of the S&P 500 companies having reported earnings results.  Earnings have been a positive factor for stocks, with 75% of the 394 S&P 500 companies that have reported beating expectations.  According to Bloomberg Intelligence, S&P earnings growth is expected to climb by +8.4% in Q4, marking the tenth consecutive quarter of year-over-year growth.  Excluding the Magnificent Seven megacap technology stocks, Q4 earnings are expected to increase by +4.6%.

The markets are discounting a 6% chance for a -25 bp rate cut at the next policy meeting on March 17-18.

Overseas stock markets settled higher on Wednesday.  The Euro Stoxx 50 rallied to a new record high and closed up +1.35%.  China’s Shanghai Composite is closed for the week-long Lunar New Year holidays.  Japan’s Nikkei Stock 225 closed up +1.02%.

Interest Rates

March 10-year T-notes (ZNH6) on Wednesday closed down by -5.5 ticks.  The 10-year T-note yield rose +2.3 bp to 4.081%.  T-notes were under pressure Wednesday from strength in equity markets, which curbed safe-haven demand for government debt.  Also, Wednesday’s stronger-than-expected US economic reports on Dec capital goods new orders, Dec housing starts and building permits, and Jan manufacturing production weighed on T-notes.  In addition, slack demand for the Treasury’s $16 billion auction of 20-year T-bonds was negative for T-notes as the Aurion had a bid-to-cover ratio of 2.46, well below the 10-auction average of 2.65. 

T-notes maintained their losses on the hawkish minutes of the Jan 27-28 FOMC meeting, where “several” policymakers suggested the Fed may need to raise interest rates if inflation stays above their goal.

European government bond yields finished mixed on Wednesday. The 10-year German bund yield rose +0.1 bp to 2.739%.  The 10-year UK gilt yield fell -0.2 bp to 4.374%.

UK Jan CPI rose +3.0% y/y, right on expectations and the smallest pace of increase in 10 months.  Jan core CPI rose +3.1% y/y, stronger than expectations of +3.0% y/y.

Swaps are discounting a 3% chance of a -25 bp rate cut by the ECB at its next policy meeting on March 19.

US Stock Movers

Chipmakers and AI-infrastructure stocks moved higher on Wednesday, supporting gains in the broader market.  Micron Technology (MU) and Western Digital (WDC) closed up more than +4%, and ASML Holding NV (ASML) closed up more than +3%.  Also, Applied Materials (AMAT) and Palantir Technologies (PLTR) closed up more than +2%, and Nvidia (NVDA), Lam Research (LRCX), and Seagate Technology Holdings (STX) closed up more than +1%. 

Silver and gold mining stocks rallied on Wednesday as gold and silver prices rebounded sharply from Tuesday’s sell-off.  Hecla Mining (HL) and Coeur Mining (CDE) closed up more than +4%.  Also, Barrick Mining (B) closed up more than +3%, and Newmont Corp (NEM), Anglogold Ashanti (AU), and Freeport McMoRan (FCX) closed up more than +2%.

Global Payments (GPN) closed up more than +16% to lead gainers in the S&P 500 after forecasting full-year adjusted EPS, including SBC, of $ 13.80 to $14.00, well above the consensus of $13.59. 

Global-e Online Ltd (GLBE) closed up more than +16% after forecasting full-year revenue of $1.21 billion to $1.27 billion, stronger than the consensus of $1.19 billion. 

Caesars Entertainment (CZR) closed up more than +13% after reporting Q4 same-store adjusted Ebitda of $901.0 million, above the consensus of $900.1 million. 

Garmin Ltd (GRMN) closed up more than +10% after reporting Q4 revenue of $2.12 billion, above the consensus of $2.00 billion, and forecasting full-year revenue of $7.90 billion, stronger than the consensus of $7.61 billion.

Pitney Bowes (PBI) closed up more than +8% after reporting Q4 adjusted EPS of 45 cents, above the consensus of 38 cents, and forecasting 2026 adjusted EPS of $1.40 to $1.60, stronger than the consensus of $1.38. 

Cadence Design Systems (CDNS) closed up more than +7% to lead gainers in the Nasdaq 100 after reporting Q4 adjusted EPS of $1.99, better than the consensus of $1.91, and forecasting full-year adjusted EPS of $8.05 to $8.15, above the consensus of $8.03.

Insulet (PODD) closed up more than +5% after reporting Q4 revenue of $783.8 million, stronger than the consensus of $768.6 million.

Analog Devices (ADI) closed up more than +2% after reporting Q1 adjusted EPS of $2.46, better than the consensus of $2.31. 

Axcelis Technologies (ACLS) closed down more than -16% after forecasting Q1 adjusted EPS of 71 cents, well below the consensus of 99 cents.

Palo Alto Networks (PANW) closed down more than -6% to lead losers in the S&P 500 and Nasdaq 100 after forecasting full-year adjusted EPS of $3.65 to $3.70, below the consensus of $3.87.  

Applied Digital (APLD) closed down more than -4% after Nvidia said it exited its equity investment in the company. 

Genuine Parts Co (GPC) closed down more than -3%, adding to Tuesday’s -14% plunge after reporting Q4 net sales of $6.01 billion, weaker than the consensus of $6.06 billion. 

Knife River Corp (KNF) closed down more than -3% after Wells Fargo Securities downgraded the stock to underweight from equal weight with a price target of $81.

Republic Services (RSG) closed down -2% after reporting Q4 revenue of $4.14 billion, weaker than the consensus of $4.21 billion, and forecasting 2026 revenue of $17.05 billion to $17.15 billion, below the consensus of %17.32 billion.

Earnings Reports(2/19/2026)

Akamai Technologies Inc (AKAM), Alliant Energy Corp (LNT), CenterPoint Energy Inc (CNP), Comfort Systems USA Inc (FIX), Consolidated Edison Inc (ED), Copart Inc (CPRT), Deere & Co (DE), EPAM Systems Inc (EPAM), Evergy Inc (EVRG), Extra Space Storage Inc (EXR), Insmed Inc (INSM), Live Nation Entertainment Inc (LYV), Newmont Corp (NEM), Pool Corp (POOL), Quanta Services Inc (PWR), Southern Co/The (SO), Targa Resources Corp (TRGP), Walmart Inc (WMT).