GDP Drops to 1.4% in 4th Quarter of 2025; PCE Holding at 2.6%; Conflict with Iran Possibly on the Weekend Agenda; Markets Shaky

Despite being a short week and indices remaining near all-time highs, markets have shown quite a bit of intraday volatility.

Through Thursday's close, the Dow is down 103 points, the NASDAQ is up 136 points, and the S&P is up 25 points. The NASDAQ looks to break a string of five straight losing weeks. It has had only one week on the positive side, that being the first full week of 2026, January 5-9.

The big number for today is the delayed release of the initial estimate for 4th quarter, 2025 GDP. The BEA released the figure at 8:30 am ET, showing real gross domestic product (GDP) increased at an annual rate of 1.4 percent in October, November and December.

Putting together the four quarters of 2025 - (0.6%), 3.8%, 4.4%, 1.4% - and dividing by four, reveals that real GDP for 2025 was a substandard 2.25%.

Compared to 2024: 0.8% 3.6% 3.3% 1.9% = 2.40%

and 2023: 2.9% 2.5% 4.7% 3.4% = 3.375%

... the U.S. is running in reverse.

The government and the usual suspect mainstream expert economists will attribute the poor showing to the government shutdown, which is pure nonsense. The federal government may have halted some procurement in October and early November, but they almost certainly spent that money as quickly as possible, in late November and December. The truer picture would likely be found in the lack of holiday spending. Tapped out consumers weren't buying Christmas presents as much as they were paying inflated prices for food, rent, insurance, and taxes.

Wall Street apparently feels the same way. Stock futures took a bit of a dive on the GDP release. If there's any one group that has a feel for the pulse of commerce in America, it's the stock and bond traders of lower Manhattan, and they don't like what they're seeing.

Additionally, according to the BEA, "the price index for gross domestic purchases increased 2.6 percent in 2025, compared with an increase of 2.4 percent in 2024. The PCE price index increased 2.6 percent, the same increase as in 2024. Excluding food and energy prices, the PCE price index increased 2.8 percent, compared with an increase of 2.9 percent."

Those numbers aren't particularly indicative of stable prices. The PCE index and the CPI have been kept artificially lower over the past six months by declining oil and gas prices. With the overwhelming consensus suspecting the Trump administration - with assistance and urging by Israel - to initiate military action against Iran possibly this weekend, traders are more than a little bit spooked about the direction of the economy and global geo-politics. The continuing saga of the Epstein affairs add yet another layer of insecurity to the general malaise.

It's more than just your run-of-the-mill mess. The U.S. is weak and threatening to kick off a military excursion that almost certainly will lead to a larger conflict, if not regional, possibly global.

At the Close, Thursday, February 19, 2026:
Dow: 49,395.16, -267.50 (-0.54%)
NASDAQ: 22,682.73, -70.91 (-0.31%)
S&P 500: 6,861.89, -19.42 (-0.28%)
NYSE Composite: 23,358.27, -29.22 (-0.12%)