Weekly Market Commentary February 16, 2026
Week in Review
Last week’s data reinforced a familiar theme: inflation is cooling, the labor market is stabilizing, and the consumer is becoming more selective.
The January Consumer Price Index (CPI) report showed continued, albeit uneven, progress on disinflation. Headline CPI rose 0.2% and eased to 2.4% year-over-year, helped by a 1.5% decline in energy prices that again acted as a drag on the overall index. Core CPI (e.g., food and energy) increased 0.3% for the month and held at 2.5% year-over-year. Beneath the surface, subdued core goods prices continued to counter persistent pressures in labor‑intensive services, while shelter inflation still added to core readings but at a diminishing pace. The marginal contribution of both owners’ equivalent rent and rent of primary residence continued to shrink, reinforcing the broader easing trend in housing costs and suggesting inflation pressures are becoming increasingly concentrated.
The January employment report delivered a notable upside surprise, with payroll growth coming in well above expectations. Yet the composition of job gains suggests the report was more consistent with job market stabilization than overheating. Hiring was concentrated in healthcare and construction, while government and finance weakened. Additionally, average hourly earnings rose 0.4% over the month. Given the sector mix, some of that firmness likely reflected composition rather than a broad-based pickup in wage pressure. Meanwhile, continuing claims edged up, hinting that re-employment is becoming more drawn out even as layoffs remain contained. Encouragingly, labor supply improved as participation rose to 62.5%, and both the unemployment rate and U‑6 declined, led by stronger prime‑age participation.
Even with these labor‑market improvements, markets remain focused on the retail consumer, where last week’s data hinted at softer momentum. December retail sales were flat (0.0% month-over-month) versus 0.3% expected, consistent with a post‑holiday cooldown and a shift toward value‑oriented spending. January existing‑home sales fell 8.4% to a 3.91 million annualized pace. While the series can be distorted by timing, weather, and other transitory factors, the directional message aligns with retail: households are becoming more discerning, and big‑ticket activity remains difficult to sustain. If this pattern persists, the consumer could become less of a growth buffer in early 2026, even as labor conditions remain broadly supportive.
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