February 2026 US Stock Market Monthly Report

Tech stock correction, QQQ -3% · ISM Manufacturing surprise +4.1 · Gold rally, GLD +13%

February 2026 was a month of clear rotation, marked by tech stock correction and defensive-sector strength. The S&P 500 fell -1.4% on the month, while the Dow Jones (-0.9%) and the Russell 2000 (-0.3%) held up relatively well, which was interpreted as the unwinding of some overheating among large-cap growth stocks. The Nasdaq 100 (QQQ) took the heaviest hit at -3.0%. Year-to-date leading sectors such as Technology (XLK) -4.5% and Consumer Discretionary (XLY) -4.2% all shifted into correction mode at once. The result was the convergence of valuation pressure on AI theme stocks and doubts about the pace of further Federal Reserve rate cuts. By contrast, Utilities (XLU) +12.0% rose to the top among all sectors, followed by Industrials (XLI) +5.7% and Energy (XLE) +11.7%. This reads as a classic defensive rotation signal. The 10-year Treasury (IEF) at +2.7% also confirmed capital flows into bonds. Economic indicators were mixed. On February 3, the ISM Manufacturing PMI came in at 52.6, beating expectations of 48.5 by a full 4.1 points and lifting hopes for an economic rebound, and on February 11 the NFP (Nonfarm Payrolls) also came in at +130k, well above expectations (+70k). However, on February 20, the GDP QoQ preliminary figure of +1.4% fell well short of expected +3.0%, stoking concerns over a growth slowdown. On February 13, CPI YoY was 2.4%, undershooting expectations (2.5%) by 0.1 percentage points. The inflation path has moved closer to the target, but late-month PPI of 2.9% (vs. expected 2.6%) rebounded and left uncertainty in its wake. This became a prelude to the next month's (March) PPI shock of 3.4%. In asset markets, gold (GLD) +13.3% and crude oil (USO) +8.8% extended their rally. The volatility index (VIX) averaged 19.2, up more than 20% from January, foreshadowing the curtain-raiser for expanded volatility. To summarize in one sentence, February was the month of "tech correction and defensive rotation."

February sector return ranking (all 11 sectors). 1. Utilities (XLU) +11.99% — 1st

2. Energy (XLE) +11.73%

3. Materials (XLB) +7.57%

4. Real Estate (XLRE) +7.03%

5. Consumer Staples (XLP) +6.52%

6. Industrials (XLI) +5.74%

7. Healthcare (XLV) +2.90%

8. Communication Services (XLC) -1.35%

9. Consumer Discretionary (XLY) -4.19%

10. Technology (XLK) -4.47%

11. Financials (XLF) -4.81%

• Aftermath of the next month's PPI rebound and the start of the Q1 earnings season
• Middle East developments and the oil price trajectory

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