Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., February 13, 2026. REUTERS/Brendan McDermid
Index Performance
U.S. broad-based indices finished the period in a sea of red. The Russell 2000 Total Return Index declined 2.03%. The Nasdaq extended its losing streak for the fifth consecutive week, as markets continued to reprice companies with outsized exposure to artificial intelligence. The S&P 500 Total Return Index also moved lower for the second week, ending the period down 1.35%
Broad-based fixed incomes indices ended the period in greener pastures. The FTSE U.S. Broad Investment Grade Bond Total Return Index rallied 0.67%, while the FTSE Municipal Tax-Exempt Investment Grade Bond Index climbed 0.32%. The FTSE High Yield Total Return Index inched 0.17%.
Macro Viewpoint
The U.S. economy is starting the year with renewed strength, with growth holding up as inflation continues to cool; a clearer contrast to the tone at the start of last year. January nonfarm payrolls increased 130,000, well above the 70,000 Reuters estimate, led by Healthcare, Social Assistance, and Construction jobs. By contrast, hiring remained soft in areas tied to the federal government and financial services. The unemployment rate inched down 10 basis points (bps) to 4.3%, versus expectations for a steady 4.4%.
With the combination of the newly released inflation data, the economy pivots away from a stagflation narrative. The Consumer Price Index for All Urban Consumers (CPI-U) for January rose 0.2% month over month on a seasonally adjusted basis, while the year-over-year rate eased to 2.4%, modestly better than the 2.5% Reuters estimate. Core CPI increased 0.3% month over month, and 2.5% year over year, keeping the underlying trend constructive but still uneven.
Markets digested the combination of steady labor conditions and easing inflation as supportive for continued policy easing. Following the CPI release, the implied odds of a June cut increased to roughly 68% (from 59%), while July rose approximately 81% (from 72%).
On the Yield Front
Yields rose following the nonfarm payroll growth data but retracted following the release of the CPI data. The two-year declined 5.8 bps, the five-year edged lower by 6.6 bps, and the 10-year retracted 5.4 bps. Finally, the 30-year inched down 5.2 bps.
Fund Flows by Asset Type
At the close of the LSEG Lipper fund flows week ending February 11, 2026. Fixed income funds are back in the race, scoring approximately $13.1bn in net inflows, with $11.6bn driven by U.S. Taxable Bond Funds. Investors are positioning for further easing by the Fed and finding shelter in U.S. Short/Intermediate Investment Grade Debt Funds and U.S. Short/Intermediate Government & Treasury Funds, which attracted $4.2bn and $3.0bn, respectively. This marked the third consecutive week of inflows above $4.0bn for U.S. Short/Intermediate Investment Grade Debt. U.S. Alternative Bond Funds and U.S. High Yield Funds were the laggers for the period posting outflows of $78m and $115m, respectively. For the period Municipals gained $1.5bn in net flows, extending their winning streak to twelve consecutive weeks.
Within Equities, investors continue to flee into other classifications amid the waterfall from U.S. Large Cap Funds. U.S. Developed International Markets Funds gathered $3.9bn, followed by U.S. Equity Income Funds ($2.9bn) and U.S. Multi-Cap Funds ($2.0bn). Despite the positive inflows into other classifications, the downpour from U.S. Large-Cap Funds (-$12.3bn), propelled, leaving the overall equity universe with an outflow of $264m.
Alternative Funds posted $1.3bn in net inflows, while Commodity Funds recorded $458m, a steep decline from the year-to-date high of $2.7bn. U.S. Money Market Funds are back on the chopping block, with a sizeable outflow of $25bn. Finally, U.S. Mixed-Asset Funds posted $312m in net outflows.
