Market Analysis – February 23, 2026
Market Overview
On Monday, February 23, U.S. equities finished broadly lower. According to the sector data, only 3 of 11 sectors ended in positive territory and overall sentiment was negative. The Dow Jones Industrial Average dropped more than 800 points for its worst day in over a month, while the S&P 500 and Nasdaq also fell around 1%. (fool.com)
Three main forces drove the sell-off:
- Global tariff shock: Over the weekend, the Trump administration announced plans to raise the new “global” tariff rate from 10% to 15%, quickly re‑injecting trade-policy uncertainty and concerns about corporate earnings and global growth. (fool.com)
- AI disruption fears: A series of recent AI tool announcements from Anthropic has stoked concerns that parts of the software, cybersecurity, and legacy IT services industries could face real business-model disruption, not just incremental competition. (mlq.ai)
- Nvidia earnings ahead: With Nvidia set to report results mid‑week, investors were inclined to take profits and de‑risk around high‑multiple growth and AI names, amplifying volatility. (fool.com)
Even in this risk‑off environment, Consumer Defensive, Utilities, and Basic Materials managed to close higher, cushioning the market’s overall decline as investors rotated toward more defensive areas.
Sector Performance
1. Consumer Defensive – A classic haven in a risk‑off day
- Return: +0.72%
- Best performers: Kroger(KR) +2.74%, Clorox(CLX) +2.53%, Dollar General(DG) +2.46%
Why it held up
- Food, household products, and discount retailers tend to show stable demand regardless of the economic cycle, so they often attract flows when macro and policy risks rise.
- With tariff worries and AI jitters hurting growth and cyclical names, investors rotated into steady cash‑flow franchises whose earnings are perceived as more predictable.
- Dollar General and other value‑focused retailers can even benefit from consumer down‑trading if economic sentiment weakens.
2. Utilities – Stability premium returns
- Return: +0.12%
- Leaders: PPL +1.73%, Edison International(EIX) +1.69%, American Water Works(AWK) +1.25%
Utilities, which provide essential services like electricity, gas, and water, are less sensitive to short‑term swings in growth and trade. On days when macro headlines dominate, investors often re‑price their dividend yield and stable cash flow as a form of safety, which is what we saw today.
3. Basic Materials – Select winners despite tariff risk
- Return: +0.11%
- Leaders: Albemarle(ALB) +2.82%, Vulcan Materials(VMC) +2.11%, Steel Dynamics(STLD) +1.34%
Higher tariffs pose a risk to global trade and commodity demand, but structural stories still matter:
- Albemarle, with its exposure to battery materials, benefits from long‑term EV and energy‑storage demand.
- Vulcan and Steel Dynamics are tied to construction and infrastructure, where U.S. domestic demand and spending plans can partially offset trade concerns.
Weak spots: Financials and Tech under pressure
1. Financial Services – Caught between credit fears and policy shocks
- Return: -2.85% (worst among sectors)
- Notable gainers: PayPal(PYPL) +6.95%, CME Group(CME) +1.11%, ICE +0.53%
Capital One(COF) slid 7.96%, dragging the sector lower.
What’s driving the move
- Private credit worries: News that Blue Owl Capital plans to liquidate roughly $1.4 billion in loans in a non‑traded private credit fund rattled investors, raising questions about funding stress and potential markdowns across parts of the credit market. Capital One, with meaningful exposure to consumer and lending, was hit hard. (finviz.com)
- The new 15% global tariff also feeds fears that slower growth, weaker corporate profits, and potential job losses could eventually lead to higher credit losses for banks and lenders. (fool.com)
Still, not all financial names traded in lockstep. PayPal rallied strongly, likely reflecting company‑specific catalysts such as restructuring, cost controls, or product initiatives, showing that stock picking still matters even on macro‑driven days.
2. Technology – When AI becomes a threat, not just a tailwind
- Sector return: -1.87%
- Gainers: Akamai(AKAM) +5.78%, Sandisk(SNDK) +2.29%, Corning(GLW) +2.01%
The broader tone, however, was set by steep losses in names like IBM -12.33%, Datadog(DDOG) -7.46%, Zscaler(ZS) -7.26%, Zebra Technologies(ZBRA) -7.82%.
IBM: AI shock triggers the worst day since 2000
- IBM shares dropped more than 12%, marking their largest single‑day loss since the dot‑com era. (mlq.ai)
- The immediate catalyst was Anthropic’s announcement of a Claude‑based AI tool designed to analyze and modernize COBOL code, a core element of IBM’s lucrative mainframe and consulting business that supports critical banking, government, and airline systems. (mlq.ai)
Why investors care so much
- For decades, IBM and a small set of specialists have benefited from the fact that very few engineers can read and maintain COBOL, enabling high‑margin, long‑duration modernization projects. (forbes.com)
- If AI can automate tasks like scanning codebases, mapping workflows, and documenting dependencies, it could compress project timelines, reduce billable hours, and erode IBM’s pricing power in this niche.
- Layer that on top of tariff and macro worries, and the market quickly embraced a narrative that “AI might cannibalize part of IBM’s own business”, prompting a sharp de‑rating even as some analysts argue the reaction looks overdone relative to near‑term earnings fundamentals. (forbes.com)
Broader software and cybersecurity “AI apocalypse” fears
- Names like Datadog and Zscaler, emblematic of high‑growth cloud and security plays, sold off sharply as well.
- Recent launches such as Anthropic’s Claude Code Security and AI co‑worker tools have fueled concerns that AI‑native, automated platforms could displace parts of traditional software and cybersecurity stacks, from code scanning to routine monitoring. (fool.com)
At the same time, Akamai and Corning advanced, highlighting that the market is differentiating between businesses that may be disrupted by AI and those that provide the infrastructure enabling AI growth—for example, networks, optical components, and data‑traffic–related services.
3. Communication Services, Energy, Consumer Cyclical, Industrials
- Communication Services: -1.37% – AT&T, T‑Mobile, and Comcast posted modest gains, but the broader media and advertising complex remains sensitive to cyclical ad budgets.
- Energy: -1.46% – Concerns that tariffs and weaker global growth could weigh on oil demand pressured the group.
- Consumer Cyclical: -1.26% and Industrials: -1.25% – These cyclical sectors sit closest to the tariff shock, facing potential cost inflation, export headwinds, and softer capital spending intentions.
Key Stock Movers
Big decliners
- IBM (Technology): -12.33%
- Hit by the double impact of AI‑driven disruption fears in core legacy IT services and a broader risk‑off move in blue‑chip multinationals amid tariff uncertainty. (mlq.ai)
- Capital One (Financials): -7.96%
- Weighed down by growing concern over private‑credit stress and potential spillovers into lenders’ balance sheets, following news of loan liquidations at a major private‑credit fund. (finviz.com)
- Zebra Technologies, Datadog, Zscaler (Technology): around -7%
- These high‑valuation software names were caught up in the “AI may automate what you sell” narrative, which has sparked an aggressive de‑risking across parts of the software complex in recent sessions. (fool.com)
Relative winners
- PayPal (Financials): +6.95% – Bucked sector weakness on company‑specific optimism around business simplification, efficiency, or new product traction.
- Akamai (Technology): +5.78% – As a key player in content delivery, security, and edge infrastructure, Akamai is often seen as a beneficiary of rising internet and AI traffic, rather than a direct target of AI disruption.
Why today matters
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AI narrative is shifting from hype to hard questions about business models
- The IBM episode underscores that investors are no longer asking only “who benefits from AI?” but also “whose high‑margin services could AI commoditize?”
- This is prompting a repricing of long‑standing fee and consulting models across software and IT services, even if near‑term earnings have yet to change.
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Tariffs re‑open debates on global growth and inflation paths
- A 15% global tariff implies higher input costs and supply‑chain friction for multinationals, which can squeeze margins and potentially re‑ignite inflationary pressures if companies pass costs on to consumers. (fool.com)
- In such an environment, markets tend to favor defensive sectors with pricing power and stable demand, like consumer staples and utilities.
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Volatility is likely to stay elevated near term
- With tariff uncertainty, evolving AI headlines, and a pivotal Nvidia earnings report all colliding in the same week, swings in sentiment and sector leadership could remain sharp. (fool.com)
- For long‑term investors, this backdrop may create opportunities in structural AI infrastructure plays and resilient defensive names, especially where fundamentals remain intact but prices have been dragged down by macro noise.
In summary, today’s market captured the tension between AI‑driven innovation and disruption, and between policy shocks and corporate resilience. Rather than reacting only to price moves, it may be a good moment to reassess:
- which companies are enhanced by AI versus those at risk of being displaced, and
- which business models can navigate a higher‑tariff, higher‑uncertainty world thanks to diversified supply chains and strong pricing power.
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