Volatility picked up across capital markets as US equities and commodities whipsawed while US treasury yields fell throughout the week.

Meanwhile, the prospect for positive near-term growth improved according to US purchasing managers. The Institute for Supply Management’s manufacturing and services indexes both indicated expansion in January, with the ISM Manufacturing Index rising to 52.6 and the Services Index reaching 53.8. Readings above 50 signal expansion, while those below 50 indicate contraction of the general state of the economy as it relates to business. The manufacturing index marked its highest level since August 2022. Consumer sentiment came in at a 6-month high and short-term inflation expectations fell according to the University of Michigan sentiment survey. Preliminary results for February showed sentiment up to 57.3 from 56.4 and 1-year inflation expectations dropping to 3.5% from 4% in January.

However, the labor market showed more signs of slowing. The Job Openings and Labor Turnover Survey (JOLTS) showed a decline to 6.5 million job openings, bringing the ratio of openings to unemployed workers down to 0.9—the lowest since early 2022. Weekly initial jobless claims increased to 231,000, a level that remains historically low.

Although economic growth remains resilient, the Chandler team maintains its view that the Federal Reserve will prioritize supporting the labor market, which may involve one 25-basis-point rate cut during the first half of 2026.

U.S. Treasuries rallied over the week, with the 2-year yield declining to 3.50%, the 5-year to 3.77%, and the 10-year to 4.22%, after starting the week at 3.57%, 3.84%, and 4.27%, respectively. The 2s/10s yield curve steepened slightly to 72 basis points as of this writing.

Next week: NY Fed 1-Year Inflation Expectations, Import/Export Price Indexes, Retail Sales, Nonfarm Payrolls, Unemployment Rate, Labor Force Participation Rate, Existing Home Sales, CPI Index

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