Market Recap - Friday February 13, 2026
Cooler Inflation Helps, But the Leadership Shift Continues
Stocks closed mostly higher today, though the gains faded into the final hour of trading. The Dow rose 0.10%, the S&P 500 edged up 0.05%, the Nasdaq slipped 0.22%, and the Russell 2000 jumped 1.18%. While the major indexes finished the week lower overall, the equal-weight S&P actually managed a small gain — another sign that market leadership continues to broaden beyond just the largest tech stocks.
The big story today was inflation. January’s CPI report came in largely in line with expectations and slightly cooler on the headline number. Headline inflation rose 0.2% month-over-month (below December’s 0.3%), while core inflation rose 0.3%, as expected. On a year-over-year basis, core inflation slowed to 2.5% — the lowest level in nearly five years. That was enough to calm some fears that inflation was reaccelerating after Wednesday’s stronger-than-expected jobs report.
As a result, Treasury yields moved lower and investors rotated back into small caps, software, semiconductors, and other cyclical areas. Big Tech, however, continued to lag, with Nvidia and Apple among the weaker performers. The theme of “Mag 7 fatigue” remains intact, as investors question the pace and profitability of AI-related capital spending. Meanwhile, several AI-leveraged companies that delivered strong earnings — including Applied Materials and Arista Networks — were rewarded, suggesting investors are becoming more selective rather than broadly bearish on the AI theme.
Crypto also bounced, with Bitcoin up over 5% on the day, though still lower for the week. Gold and silver rallied as well. Oil finished little changed. Overall, market breadth was positive — more stocks rose than fell — reinforcing the idea that this rally is no longer just about mega-cap tech.
Here’s Our Take
This week was less about direction — and more about rotation.
We saw three major forces at work:
Continued underperformance from the largest AI-heavy stocks.
A meaningful rebound in defensives and small caps.
Inflation data that didn’t derail the soft-landing narrative.
The CPI report didn’t dramatically change the outlook, but it reduced the risk of an immediate “higher-for-longer” shock. Markets are now pricing the next rate cut around June, giving equities some breathing room.
At the same time, the AI narrative is evolving. It’s no longer enough to simply be “AI-exposed.” Investors are starting to differentiate between companies with real earnings leverage versus those facing margin pressure, capex scrutiny, or disruption risk.
Volatility remains elevated. Sentiment has cooled. Positioning looks cleaner than it did a month ago. That combination often sets the stage for more selective — but still constructive — upside. Next week brings lighter economic data, but the focus will remain on earnings quality, AI capex follow-through, and whether the broadening-out trade continues.
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