By Teresa Rivas

It may take more than a break on tariffs for the market to overcome its other big worries: AI and private credit.

The Supreme Court's decision -- striking down President Donald Trump's use of emergency powers to impose tariffs -- was certainly welcome. Yet the verdict was widely expected -- betting markets had it at 74% odds -- and investors reacted modestly to the news.

The S&P 500 was up 1.3% on the week as of midday Friday, and is now 0.9% higher year to date, despite lots of big moves in individual stocks and sectors. The Dow Jones Industrial Average was also up 1.3% this week, while the Nasdaq Composite was climbing 1.8%.

The Supreme Court muddied the tariff waters but didn't clear them. Trump condemned the ruling and said he would introduce new 10% global tariffs on top of existing levies, under a different legal authority. The president also said he would initiate other trade investigations.

While many analysts applauded the Supreme Court ruling as a win for the economy, they noted that the fight is hardly over.

"Tariffs rarely disappear; they mutate," Siebert Financial Chief Investment Officer Mark Malek wrote in a commentary. Jeff Buchbinder, chief equity strategist at LPL Financial, suggested investors "fade" a short-term bounce on the ruling because the administration will quickly find new ways to impose tariffs.

The Supreme Court decision will have ripple effects, though. It impacts about 60% of last year's tariff revenue, or $133 billion. Analysts estimate $129 billion worth of tariff revenue could be eligible for refunds, and scores of companies may have a better shot at getting them.

Yet investors aren't convinced that will happen soon, if at all. Costco Wholesale, one of the most prominent companies seeking refunds, was down 0.5% Friday.

The economic impact cuts both ways. A steep drop in tariff revenue would increase the federal deficit. That would be negative for bonds and put upward pressure on Treasury yields, which rose a little Friday.

At the same time, lower tariff costs would be positive for consumers and corporate profit margins and may alleviate some inflationary pressures. That, in turn, could pave the way for additional rate cuts later this year.

While the tariff sludge remains, markets digested mixed economic data. Durable goods orders fell less than expected, while housing starts and industrial production increased. Yet the Federal Reserve's preferred inflation gauge, personal consumption expenditures, rose 0.4% in December from the prior month and 3% from a year earlier, muddying the case for rate cuts.

Markets are treading water due to other concerns too -- notably private credit and ongoing fears about artificial intelligence whacking software and services companies.

Alternative-asset managers took a beating, led by Blue Owl Capital, which halted quarterly redemptions at one of its private-credit funds. Investors are getting antsy about a credit bubble and contagion effects cross the $20 trillion industry. The stocks continued to slide Friday with companies like Blackstone, Ares Management, and Apollo Global down more than 3%.

Software and financial-services companies took a break from selling off as investors welcomed positive results from Moody's and Figma. Software is now trading at its lowest multiple in over a decade, according to Bank of America, but that doesn't mean it's a buy; BofA sees potential for multiples to compress further.

Investors may need more evidence that AI won't be a destructive force. A break on tariffs won't do the trick.

Write to Teresa Rivas at teresa.rivas@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

February 20, 2026 14:33 ET (19:33 GMT)

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