US Equity Indexes Mixed After Supreme Court Strikes Down Trump's Tariffs, Inflation Rate Rises

01:31 PM EST, 02/20/2026 (MT Newswires) -- US equity indexes traded mixed as the Supreme Court struck down President Donald Trump's worldwide tariffs, the economy grew at a slower pace than forecast for Q4, and the Federal Reserve's preferred inflation gauge turned hot.

The Nasdaq Composite rose 0.7% to 22,843.3, and the S&P 500 climbed 0.4% to 6,892.1 after midday Friday. The Dow Jones Industrial Average, however, was steady at 49,426.5. The communication services sector was the standout gainer, while energy led the decliners.

The Supreme Court struck down Trump's tariffs, which have brought in hundreds of billions of dollars of revenue for the government since their imposition last year, stating that the International Emergency Economic Powers Act does not support such actions.

"We claim no special competence in matters of economics or foreign affairs," Chief Justice John Roberts said in the opinion of the court. "We claim only, as we must, the limited role assigned to us by Article III of the Constitution. Fulfilling that role, we hold that IEEPA does not authorize the President to impose tariffs."

US Treasury yields rose, with the 10-year climbing 2.1 basis points to 4.1%.

"We expect little effect on economic impact, but the decision could be a tailwind for sectors where tariffs are less likely to be re-imposed," a Morgan Stanley note said. "Initial Treasury sell-off is likely short-lived as any issuance needs are met with bills."

Meanwhile, in economic news, US gross domestic product grew by an annualized 1.4% in Q4 following a 4.4% jump in the previous quarter, below the 2.8% increase expected in a Bloomberg-compiled survey.

The partial federal government shutdown late last year exaggerated the slowdown by 1 percentage point, as expected, Morgan Stanley said in a separate note. More fundamentally, growth in private final domestic purchases fell from Q3 and a year ago. Consumption growth weakened while capital expenditure increased.

"AI accounted for about 1/2 of the rise in capex, though AI-imports lowered its overall contribution to GDP to near zero," according to the note.

Meanwhile, the personal consumption expenditures, or PCE, price index rose by 0.4%, faster than the 0.3% gain expected, lifting the year-over-year rate to 2.9% from 2.8%. The price index rose by 0.2% month-over-month in November, the Bureau of Economic Analysis said Friday.

The core PCE price index increased by 0.4%, above the 0.3% increase expected and following a 0.2% gain in November. The year-over-year rate accelerated to 3.0% from 2.8% in the previous month.

The University of Michigan consumer sentiment index was revised downward to 56.6 for February from 57.3 in the preliminary estimate, compared with expectations for no revision in a Bloomberg-compiled poll.

Respondents in the Michigan survey expected a 3.4% inflation rate over the next year and 3.3% over the next five years, versus 4.0% and 3.3%, respectively, in January. The one-year rate was the lowest since January of last year.

West Texas Intermediate crude oil futures declined 0.3% to $66.22 a barrel.

Trump on Thursday said Iran has 10 to 15 days to agree to his demands, according to reports.

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