Markets Pull Back as AI Concerns and Inflation Stay in Focus

Week Ending February 27, 2026

Markets moved lower last week as investors worked through two main issues: renewed concerns about how artificial intelligence may reshape parts of the economy, and inflation data that came in a little hotter than expected.

The pullback was not dramatic, but it was enough to remind investors that markets are still sensitive to inflation readings and big-picture structural shifts like AI. Overall, this felt more like a reset than a major shift in direction.

Market Overview

Weekly Market Performance (February 23, 2026 to February 27, 2026)

• S&P 500: -0.44%
• Nasdaq Composite: -0.95%
• Dow Jones Industrial Average: -1.27%
• MSCI EAFE International Developed Markets: +1.22%
• S&P/TSX Composite Index: -0.80%

U.S. Markets: AI Back in the Spotlight

Markets started the week on the defensive after a research report suggested artificial intelligence could have broader implications for jobs and corporate profitability.

The concern isn’t that AI is going away. It’s that the pace of change may be faster than many industries are ready for. Selling spread beyond large technology companies and into financials and industrial names as investors paused to reassess long term disruption risks.

Midweek, we saw a bounce. Investors stepped back into some of the AI related stocks that had sold off earlier, particularly in software and semiconductor names. Optimism ahead of a major chipmaker’s earnings report helped lift sentiment for a couple of days.

By the end of the week, however, markets lost momentum again.

The Dow saw the most pressure, which is notable since it has been leading performance so far this year.

Inflation Still Not Fully Settled

Friday’s Producer Price Index report showed wholesale prices rose 0.5 percent in January, higher than the 0.3 percent economists had expected.

In simple terms, businesses are paying a little more for goods and services than anticipated. When that happens, investors worry those higher costs may eventually make their way to consumers.

The Federal Reserve has been looking for steady progress toward its 2 percent inflation goal. Readings like this suggest that progress may not be perfectly smooth, which can push back expectations for rate cuts.

That uncertainty weighed on markets into the weekend.

Canada and the TSX

Canadian markets declined approximately 0.80 percent during the week.

Performance across sectors was mixed. Financials and industrials softened alongside U.S. markets, while energy and materials held up better.

Oil prices firmed modestly during the week, which helped support the energy sector. Canada’s market is more diversified and resource focused than the U.S., so it often reacts differently when commodities move.

Sector Snapshot

• Financials were weaker in line with broader market caution
• Energy found support as oil prices firmed
• Materials remained relatively stable
• Technology saw volatility as AI concerns resurfaced

On the economic front, Canadian investors continue watching signs of moderating growth and inflation. The Bank of Canada remains cautious and data dependent, and markets are still assessing when additional rate adjustments might occur.

Canada’s balanced sector mix continues to provide stability when technology driven swings dominate U.S. markets.

Geopolitical Spotlight: Iran Escalation Over the Weekend

After markets closed on Friday, geopolitical tensions escalated involving Iran.

Because this occurred over the weekend, it did not affect last week’s returns. However, it will likely influence sentiment in the days ahead.

The main economic concern is oil.

Roughly 20 percent of global oil and LNG shipments move through the Strait of Hormuz. Any disruption to that route can quickly push oil prices higher.

Even before the weekend developments, oil markets were carrying a modest geopolitical premium. If tensions persist or expand, higher oil prices could influence inflation expectations and central bank decisions.

At this stage, the situation remains fluid. Markets will be watching closely to see how it evolves and whether there are meaningful impacts to global energy supply.

What Is Driving the Market

Several themes shaped trading last week:

• Renewed concerns around artificial intelligence
• Inflation data coming in slightly above expectations
• Uncertainty around the timing of interest rate cuts
• Rotation across sectors
• Cautious but orderly market sentiment

Why This Matters

• Markets are adjusting to a more complex environment.
• Inflation is improving, but not in a straight line.
• Technological change is accelerating.
• Central banks remain cautious.
• Geopolitical risks can reappear quickly.
• Despite short term volatility, economic growth remains positive and corporate earnings continue to provide support.

Periods like this reinforce the importance of staying disciplined and focused on long term strategy rather than reacting to headlines.

Economic Snapshot

Investors remain focused on whether inflation can continue trending lower without slowing the economy too sharply.

Key areas to watch:

• Employment data
• Inflation reports
• Central bank commentary
• Oil price movements following weekend developments

Markets are looking for confirmation that inflation is moving steadily toward target levels while growth remains resilient.

This Week: Key Economic Data

Monday, March 2nd 

• PMI Manufacturing
• ISM Manufacturing
• Auto Sales

Tuesday, March 3rd

• Fed Presidents John Williams and Neel Kashkari speak

Wednesday, March 4th

• ADP Employment Report
• PMI Services
• ISM Services
• Federal Reserve Beige Book

Thursday, March 5th

• Weekly Jobless Claims
• Q4 Productivity
• Import Prices

Friday, March 6th 

• Federal Employment Report
• Cleveland Fed President Beth Hammack speaks

This Week: Companies Reporting Earnings

Tuesday, March 3rd

• CrowdStrike

Wednesday, March 4th

• Broadcom

Thursday, March 5th

• Costco
• Marvell Technology

"I don’t believe in being serious about anything. I think life is too serious to be taken seriously."
– Ray Bradbury

All about but unseen, can be captured but can’t be held, has no throat but can be heard. What is it?

^{Last Week's Riddle: Brothers and sisters, I have none, but this man's father is my father's son. Who am I talking about?
Answer: My son.}

Tanya's son, Callum, rocking his Pokemon PJs and Raymond James sunglasses!

Footnotes and Sources

1. WSJ.com, February 27, 2026
2. Investing.com, February 27, 2026
3. CNBC.com, February 23, 2026
4. CNBC.com, February 25, 2026
5. WSJ.com, February 27, 2026
6. WSJ.com, February 27, 2026
7. IRS.gov, August 18, 2025
8. Livesimplynatural.com, August 25, 2025

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