February delivered a choppy close to the first quarter of trading in 2026, with the S&P 500 finishing the month down approximately 0.9% near 6,879 after briefly testing higher levels. The Nasdaq underperformed with a 3.4% drop, while the Dow posted a modest 0.2% gain, highlighting a clear rotation away from high-valuation tech names toward value and cyclical sectors.

This US stock market performance in February 2026 reflected a tug-of-war between supportive domestic data and mounting external pressures, setting a measured tone for the S&P 500 forecast March 2026.

Key economic highlights

Cooling inflation, with January CPI coming in at 2.4% year-over-year (down from 2.7% prior) and core at 2.5%, the lowest core reading in years. January jobs data also beat expectations, adding 130,000 positions with unemployment ticking to 4.3%. The Fed held rates steady, maintaining a data-dependent stance amid these positive signals. However, late-month readings and forward-looking concerns introduced…

January Performance

US equity markets saw strong early momentum in January, driven by solid corporate results and steady macro trends. Consumer prices were benign (Dec CPI +0.3%, 2.7% y/y), and the Fed held rates steady at 3.00–3.75% on Jan. 28 as expected.

Big Tech earnings beat estimates, propelling indices to fresh records – e.g. on Jan. 30 the S&P 500 closed at ~6,939.03 (a 1.3% gain for January) amid gains in Microsoft, Apple and others. Even as consumer confidence unexpectedly plunged to its lowest since 2014, U.S. stocks barely budged, buoyed by a weaker dollar and robust earnings.

However, late-month news checked the rally. On Jan. 30, the S&P 500 fell about 0.4% (to ~6,939) as investors digested a hotter-than-expected inflation signal (U.S. Dec producer prices +0.5% vs 0.2% forecast) and the surprise nomination of Kevin Warsh as Fed Chair (seen as relatively hawkish). By month-end, the S&P 500 was roughly flat…

Summary: December wrapped up 2025 with the S&P 500 at record highs on cooling inflation and a Federal Reserve rate cut, even as mixed corporate earnings swayed investor sentiment.

In this January forecast, we review December’s key macroeconomic and microeconomic drivers – from interest rate shifts to major earnings reports – and outline three potential market scenarios (positive, neutral, negative) for the month ahead, including how the S&P 500 could respond under each.

December Macro & Micro Recap

Macroeconomic Highlights

The U.S. Federal Reserve delivered a 0.25% interest rate cut in mid-December, its third consecutive reduction, bringing the benchmark rate down to 3.5%–3.75%. This move was a response to slowing job growth and a tick up in unemployment, which Fed officials felt warranted “slightly less restrictive”policy.