From the Desk - Economic Commentary
Scott Hofer, Member Strategies Manager - 2/27/2026
U.S. stocks opened lower this morning as markets reacted to a combination of tech sector weakness, rising inflation pressures, and continued geopolitical uncertainty. The drop reflects ongoing anxiety around AI related disruptions that have weighed heavily on growth and software names. The declines deepened after the hotter than expected Producer Price Index report, which showed wholesale inflation accelerating more than forecast, reinforcing concerns that inflation remains sticky and may delay Federal Reserve rate cuts. Tech stocks—already under pressure from yesterday’s Nvidia led sell off—continued to drag the broader market lower, as investors reassessed valuations tied to AI spending and future profitability. Geopolitical tensions, particularly stalled U.S.–Iran discussions, added another layer of caution contributing to risk off sentiment across markets.
Regarding the latest economic releases, the latest Producer Price Index report shows that headline PPI rose 0.5% in January, exceeding forecasts and marking an acceleration from December’s 0.4% gain. Core PPI, which excludes food and energy, increased 0.8%, also sharply above expectations and the largest monthly rise since mid 2025. Over the past 12 months, headline wholesale prices climbed 2.9%, while core wholesale prices increased 3.6%, both remaining well above the Federal Reserve’s inflation target. The monthly increase was driven largely by a 0.8% surge in services prices, fueled by strong gains in trade services margins, while goods prices fell 0.3%, with declines in food and energy offset partly by rising metal prices.
Next, February Chicago PMI showed a sharp acceleration in regional business activity, with the Chicago Business Barometer rising to 57.7, up from 54 in January and well above expectations of 52.8. This marks the indicator’s second consecutive month of expansion since November 2023 and reflects the strongest pace of growth in the region’s activity since May 2022.
Finally, the total construction spending in December?2025 reached a seasonally adjusted annual rate of $2,168.8?billion, up 0.3% from November but 0.4% below December?2024. Private construction rose to $1,647.1?billion, with residential activity increasing 1.5% while nonresidential spending slipped 0.7% from November. Public construction declined slightly to $521.7?billion, including small decreases in educational and highway projects. For the full year 2025, total construction spending fell 1.4% from 2024, with private construction down 2.9% and public construction up 3.6%.
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