Illuminated Madison Square Garden at night, as seen from an observation deck at the Edge at Hudson Yards in New York City, U.S., January 27, 2026. Picture taken through glass. REUTERS/Bing Guan
Index Performance
U.S. broad-based indices finished the period in a sea of red. The Nasdaq declined 5.06%. The S&P 500 Total Return Index ticked down 2.81%, and the Dow Jones Industrial Index also moved lower, ending the period down 0.36%. While the Russell 2000 Index plummeted 2.47%.
Broad-based fixed incomes indices also ended the period in mixed waters. The FTSE Municipal Tax-Exempt Investment Grade Bond Index gained 0.32%, while the FTSE High Yield Total Return Index tumbled 0.27%. The FTSE U.S. Broad Investment Grade Bond Total Return Index dipped 0.47%.
Macro Viewpoint
The May job report came in hot. Nonfarm payrolls rose by 172,000 in May and the unemployment rate held at 4.3%, more than double the Reuters consensus of 85,000. March data was revised up by 29,000 to 214,000 and April was revised up by 64,000 to 179,000, leaving the two months a combined 93,000 higher than first reported. The gains were concentrated in a few corners: leisure and hospitality added 70,000, local government added 55,000, and healthcare added 35,000. The financial sector was the soft patch; jobs related to financial services were down 22,000 for the month. Payroll growth was steady, average hourly earnings rose 0.3% for the month and 3.4% year over year, while the labor force participation rate held at 61.8%.
On the Yield Front
Yields jumped amid the news. The two and five-year Treasury yields climbed 11bps and 9.2 bps, respectively, while the 10-year inched higher by 5.9 bps. On the other hand, the 30-year yield had a marginal gain of 0.8 bps.
Fund Flows by Asset Type
Cash kept piling up. Investors moved roughly $130bn of net new money into U.S. funds with nearly $111bn going straight into U.S. money market funds. If we remove cash from the equation the tone is calmer, but still constructive: bonds and equites each pulled in a little over $9bn, alternatives added close to $4bn, while commodities and mixed-assets funds faced outflows.
Equity
Equity flows were net positive at roughly $9.2bn, but the mix matters more than the headline. Sector equity led the race with $4.3bn, followed by U.S large-cap with $3.4bn, small-cap and equity income at $3.2bn each, while world sector equity added $2.1bn. The inflow into U.S. markets came from across the pond, with U.S. Developed International losing $2.5bn, and Emerging Markets losing $1.9bn.
Fixed Income
Fixed income added approximately $9.7bn, nearly all of it on the taxable side. The largest single bucket was U.S. General Domestic Taxable Fixed Income at slightly more than $4bn, with U.S. Short and Intermediate Investment-Grade close behind at $3.8bn. U.S. High Yield, World Income, and Alternative Bond Funds each chipped in. On the opposite side of the spectrum, U.S. Government and Treasury Funds lost $4bn as investors stepped away from longer-dated government securities, while they bought $1.5bn in shorter-dated U.S. Government and Treasusry Funds. U.S. Municipals were positive with a net inflow of $1.3bn.
Commodities, Mixed-Assets, and Alternatives
Commodities saw the biggest single-category outflow outside of government bonds, shedding approximately $2.1bn. U.S. Mixed-Assets Funds were modestly negative at around half a billion, dragged entirely by target-allocation funds, while target-date flows were essentially flat. Alternatives went the other way by attracting $2.7bn into alternative equity strategies.
Money Market
U.S. Money Market Funds were on fire this week. U.S. Taxable Money Market Funds took in almost $113bn, while tax-exempt funds lost $1.4bn. Front-end yields are still high, so holding cash pays investors while they wait, and that’s exactly what people are doing.
