Global Economy & Markets, Weekly Roundup 17/02/26
Market gyrations suggest that a rising AI tide may not lift all boats
Pockets of nervousness related to Artificial Intelligence remain a notable equity performance factor, on top of major US economic data releases (labor market, inflation).
The S&P500 decreased by -1.4% wow (6836), with Banks underperforming (-6.7%) following renewed calls from the US President and high-level federal government officials for a decrease in credit card interest rates (21% in Q4:2025, only slightly below a peak of 21.8% in Q3:2024).
Information Technology shed -2.0% wow, with Software firms entering a bear market. Concerns remain vis-à-vis the return on invested capital (ROIC) amid a substantial debt issuance increase ($165 billion in 2025), as the AI race moves forward.
In addition, investors remain attentive on whether some established firms in a broad range of sectors (interactive media, logistics, insurance, health care technology, wealth management) will manage to adjust in a timely and effective manner their business models to a landscape rapidly reshaped by AI advancements, or instead they will be partly displaced in terms of market share by possibly more well-adjusted newcomers.
Respective investors’ impatience was apparent, inter alia, in stock price movements of several companies with freight logistics accounting for a substantial part of their operations. In the event, a sharp fall occurred on Thursday (e.g. in the US, CH Robinson Worldwide was down by -15% and in Europe, DSV A/S by -11%, albeit partly recovering by the end of the week) after a small in terms of market capitalization AI-focused US firm claimed that its platform optimizes freight routes, lowering costs significantly.
On US economic activity, the latest labor market report was mixed, with very strong job creation (non-farm payrolls: +130k on net) in January, but also a substantial downward revision for prior figures. Looking forward, the advance real GDP estimate for Q4:2025 is due on February 20th, with NBG estimates for a solid +3.9% qoq saar (+2.9% yoy), from +4.4% qoq saar (+2.3% yoy) in Q3:2025.
At the same time, expectations for a significant deceleration of the annual growth of the headline CPI in January, given also negative base effects for energy prices, were confirmed, at +2.4% yoy from +2.7% in December. The core’s annual growth also decelerated, albeit more modestly, at +2.5% yoy in January from +2.6% in the previous month.
The deceleration in CPI inflation resulted in the curve of investors’ anticipated path of the Federal Funds Rate (FFR), moving lower by 6 to 7 bps, while also contributing to a decrease in US Treasury yields. The 10-year yield fell by -16 bps wow to 4.05% (a 2½-low) and the 2-year by -9 bps wow to 3.41% (the lowest since September 2022), with both down by c. -6 bps on Friday after the CPI report.
In all, FFR futures now price in close to equal chances of 2 or 3 cuts by end-2026 to a range of 2.75% - 3.00% or to 3.00% - 3.25%, respectively. In any case, bearing an unwarranted substantial economic activity slowdown or an unexpected spike in inflation, any major monetary policy decisions appear set to come after Chair Powell’s term ends in May.
Pockets of nervousness related to Artificial Intelligence remain a notable equity performance factor, on top of major US economic data releases (labor market, inflation).
The S&P500 decreased by -1.4% wow (6836), with Banks underperforming (-6.7%) following renewed calls from the US President and high-level federal government officials for a decrease in credit card interest rates (21% in Q4:2025, only slightly below a peak of 21.8% in Q3:2024).
Information Technology shed -2.0% wow, with Software firms entering a bear market. Concerns remain vis-à-vis the return on invested capital (ROIC) amid a substantial debt issuance increase ($165 billion in 2025), as the AI race moves forward.
In addition, investors remain attentive on whether some established firms in a broad range of sectors (interactive media, logistics, insurance, health care technology, wealth management) will manage to adjust in a timely and effective manner their business models to a landscape rapidly reshaped by AI advancements, or instead they will be partly displaced in terms of market share by possibly more well-adjusted newcomers.
Respective investors’ impatience was apparent, inter alia, in stock price movements of several companies with freight logistics accounting for a substantial part of their operations. In the event, a sharp fall occurred on Thursday (e.g. in the US, CH Robinson Worldwide was down by -15% and in Europe, DSV A/S by -11%, albeit partly recovering by the end of the week) after a small in terms of market capitalization AI-focused US firm claimed that its platform optimizes freight routes, lowering costs significantly.
On US economic activity, the latest labor market report was mixed, with very strong job creation (non-farm payrolls: +130k on net) in January, but also a substantial downward revision for prior figures. Looking forward, the advance real GDP estimate for Q4:2025 is due on February 20th, with NBG estimates for a solid +3.9% qoq saar (+2.9% yoy), from +4.4% qoq saar (+2.3% yoy) in Q3:2025.
At the same time, expectations for a significant deceleration of the annual growth of the headline CPI in January, given also negative base effects for energy prices, were confirmed, at +2.4% yoy from +2.7% in December. The core’s annual growth also decelerated, albeit more modestly, at +2.5% yoy in January from +2.6% in the previous month.
The deceleration in CPI inflation resulted in the curve of investors’ anticipated path of the Federal Funds Rate (FFR), moving lower by 6 to 7 bps, while also contributing to a decrease in US Treasury yields. The 10-year yield fell by -16 bps wow to 4.05% (a 2½-low) and the 2-year by -9 bps wow to 3.41% (the lowest since September 2022), with both down by c. -6 bps on Friday after the CPI report.
In all, FFR futures now price in close to equal chances of 2 or 3 cuts by end-2026 to a range of 2.75% - 3.00% or to 3.00% - 3.25%, respectively. In any case, bearing an unwarranted substantial economic activity slowdown or an unexpected spike in inflation, any major monetary policy decisions appear set to come after Chair Powell’s term ends in May.