Key Focus This Week “Core PCE, GDP and Walmart Earnings to Test Market Conviction in Holiday-Shortened Week”

With U.S. markets closed Monday for Presidents’ Day, trading volumes are expected to remain lighter at the start of the week before accelerating into a series of high-impact economic releases. Following last week’s combination of resilient labor data and moderating CPI, markets now turn to confirmation signals on both inflation and growth momentum.

The primary focus will be Friday’s release of the Core Personal Consumption Expenditures (PCE) Index — the Federal Reserve’s preferred inflation measure. After January CPI showed further easing in price pressures, investors will assess whether PCE data confirms that disinflation remains on track. Any upside surprise could challenge current rate-cut expectations, while continued moderation would reinforce the view that policy easing later this year remains viable.

Growth dynamics will also come under scrutiny. The advance estimate of fourth-quarter U.S. GDP, alongside personal income and spending data, will provide insight into consumer resilience entering 2026. Recent labor market strength suggests underlying economic stability, but markets will look for confirmation that consumption and output remain durable without reaccelerating inflation pressures.

Housing and trade data scheduled earlier in the week will add further clarity to domestic demand and external balance conditions, particularly as higher rates continue to influence interest-sensitive sectors.

On the corporate front, Walmart’s earnings report will serve as a key barometer of consumer behavior. As one of the largest U.S. retailers, its results and forward guidance may offer important signals regarding discretionary spending, pricing power, and margin sustainability. In a market environment increasingly sensitive to forward guidance, earnings commentary may have outsized influence on sector positioning.

Last Week’s Key Economic Data & News Recap

U.S. January Jobs Report Surprises to the Upside, Tempering Immediate Rate-Cut Expectations

The delayed January employment report showed that the U.S. economy added 130,000 nonfarm payrolls, exceeding market expectations of roughly 55,000–70,000. The unemployment rate declined to 4.3%, down from 4.4% in the prior month. While the headline figure reflects continued labor market resilience, the broader trend remains one of moderating employment growth following substantial downward revisions to prior months.

The stronger-than-expected payroll data reduced expectations for an immediate Federal Reserve rate cut. Interest rate futures pricing shifted following the release, with market-implied probabilities for near-term easing declining as investors reassessed the timing of potential policy adjustments. The data reinforced the view that policymakers can remain patient while monitoring both inflation and labor market dynamics.

Inflation Continues to Moderate as January CPI Slows Further

Inflation data released at the end of the week showed further easing in price pressures. The Consumer Price Index rose 2.4% year-over-year in January, down from 2.7% in December, marking the lowest annual pace since May. Core CPI, which excludes food and energy, increased 2.5% year-over-year, down from 2.6% previously and the lowest reading since early 2021.

On a monthly basis, headline CPI increased modestly, reflecting stable energy prices and slower goods inflation. The combination of moderating inflation and a still-stable labor market supports a “higher-for-longer but not tightening” narrative for monetary policy. While markets continue to anticipate rate cuts later in the year, the January data did not materially accelerate expectations for immediate easing.

Equity Markets Experience Volatility Despite Constructive Macro Data

Despite encouraging macroeconomic data, U.S. equities experienced elevated volatility throughout the week. Major indexes moved between gains and losses as investors weighed the implications of resilient labor data, moderating inflation, and earnings results.

Mid-week selling pressure intensified in large-cap technology names, contributing to sharp intraday swings. On Thursday, the Dow Jones Industrial Average fell more than 600 points as risk sentiment deteriorated following earnings reactions and positioning ahead of CPI. By Friday, inflation data helped stabilize sentiment, though weekly performance reflected the market’s sensitivity to both policy expectations and corporate guidance.

Key Earnings Highlight Divergence Across Sectors

Corporate earnings were a major driver of sector rotation during the week. In consumer discretionary, McDonald’s reported quarterly results that exceeded expectations, with global comparable sales increasing 5.7% and U.S. comparable sales rising 6.8%, supported by value-focused promotions and resilient consumer demand.

In contrast, Ford reported a quarterly net loss of approximately $11.1 billion, largely reflecting write-downs and restructuring charges, though revenue came in at $45.9 billion, slightly above estimates. The company issued full-year EBIT guidance of $8–$10 billion, highlighting ongoing margin pressure in electric vehicle operations.

Within consumer staples, Coca-Cola’s quarterly revenue came in slightly below expectations, and the company guided to 4%–5% organic revenue growth for 2026, a pace viewed as moderate relative to prior years.

In technology, margin concerns resurfaced as companies cited higher component and input costs. Several large-cap names experienced significant post-earnings price swings, reinforcing investor sensitivity to profit margins and forward guidance amid elevated valuations.