The market received some key economic datapoints this week as some reports have been delayed due to the government shutdowns. The long-awaited advance retail sales reading from December was flat on a month-over-month basis, much lower than expected following a strong November print, indicating that holiday spending was pulled forward. Control group sales, which feeds into the Gross Domestic Product (GDP) calculation, was down 0.1% in the month. Retail sales were up 2.4% on a year-over-year basis. Consumer spending could see a boost in 2026 from tax cuts and refunds during tax season, although January could prove to be another slow month for retail activity due to winter storms. A report from the Federal Reserve Bank of New York from the fourth quarter of 2025 showed that household debt returned to pre-pandemic levels, as delinquencies on mortgages for lower income borrowers and student loans climbed. The strength of the labor market will play a large role in the health of the consumer this year.
The US employment report which was originally scheduled for February 9 was released on Wednesday, reflecting much better than expected gains so far in 2026. Nonfarm payrolls increased by 130,000 jobs in January, while the three month moving average moved back into positive territory to 73,000 jobs per month. Health care, social assistance, and construction saw large gains, while federal government and financial activities employment declined. Post-revision job increases for 2025 only averaged around 15,000 jobs per month, with a large drag from the reduction of the federal workforce. The unemployment rate fell to 4.3% on strong job growth. Average hourly earnings remained elevated with a 3.7% year-over-year increase for January.
The Consumer Price Index (CPI) cooled to a 0.2% increase for the month of January, up 2.4% year-over-year. Used car and energy prices fell, while food and shelter prices decelerated. Shelter was still the largest component of the monthly gain. Core CPI, which excludes the volatile food and energy components, increased 0.3% month-over-month and 2.5% year-over-year.
US Treasuries rallied this week on the lower than expected CPI print, weak retail sales, and stock market volatility. Equity markets fell on worries that artificial intelligence spending is elevated and that the technology could cause margin compression and disruptions in additional industries such as financial services and software. This week the yield curve has flattened; the 2-year US Treasury yield is down 8 basis points to 3.42%, the 5-year has declined 14 basis points to 3.62%, and the 10-year is 16 basis points lower to 4.06% as of this writing.
Next Week: Empire Manufacturing, Durable Goods, Housing Starts, Leading Economic Indicators (LEI), Industrial Production, FOMC Meeting Minutes, Wholesale Inventories, Philadelphia Fed Business Outlook, Personal Consumption Expenditures (PCE), 4th Quarter Gross Domestic Product (GDP), S&P Global US Manufacturing Purchasing Managers Index (PMI), S&P Global US Services PMI, New Home Sales, University of Michigan Sentiment.
© 2026 Chandler Asset Management, Inc. An SEC Registered Investment Adviser. Data source: Bloomberg, Federal Reserve, and ADP. This report is provided for informational purposes only and should not be construed as specific investment or legal advice. The information contained herein was obtained from sources believed to be reliable as of the date of publication, but may become outdated or superseded at any time without notice. Any opinions or views expressed are based on current market conditions and are subject to change. This report may contain forecasts and forward-looking statements which are inherently limited and should not be relied upon as an indicator of future results. Past performance is not indicative of future results. This report is not intended to constitute an offer, solicitation, recommendation, or advice regarding any securities or investment strategy and should not be regarded by recipients as a substitute for the exercise of their own judgment. Fixed income investments are subject to interest rate, credit, and market risk. Interest rate risk: The value of fixed income investments will decline as interest rates rise. Credit risk: the possibility that the borrower may not be able to repay interest and principal. Low-rated bonds generally have to pay higher interest rates to attract investors willing to take on greater risk. Market risk: the bond market, in general, could decline due to economic conditions, especially during periods of rising interest rates.