Market Recap - Wednesday February 11, 2026
Stronger Jobs, Rising Yields, and a Market Searching for Direction
Stocks finished mostly flat today, but once again the calm at the index level masked a lot of movement underneath. The Dow slipped slightly, the S&P 500 was essentially unchanged, the Nasdaq edged lower, and small caps pulled back modestly. After early gains, stocks faded as the day progressed, with rising Treasury yields and fresh AI concerns keeping investors cautious.
The big story was the January jobs report. The economy added 130,000 jobs — well above expectations for around 70,000 — and the unemployment rate ticked down to 4.3%. Wage growth also came in a bit stronger than expected. On the surface, that’s a positive sign of resilience. However, stronger data pushed Treasury yields higher and reduced expectations for aggressive rate cuts this year. Markets are now pricing closer to 50 basis points of cuts for 2026, down from earlier in the week.
Sector performance reflected this tug-of-war. Semiconductors and memory stocks continued their strong year-to-date run, helped by upbeat earnings from several AI and data center-related companies. Energy, machinery, and industrial metals also held up well. Meanwhile, software stocks slipped again amid ongoing AI disruption fears, and many big tech names lagged as investors continue scrutinizing massive hyperscaler capex spending. Financials, online brokers, and housing stocks also saw pressure as rates moved higher.
Earnings season remains solid overall, with S&P 500 earnings growth now running around 13% year-over-year — well above expectations from a few months ago. Several companies tied to AI infrastructure and industrial demand posted strong results and rallied sharply. On the downside, consumer discretionary and software names saw big post-earnings declines, highlighting how selective this market has become.
Beyond jobs, deficit concerns were back in the spotlight. A new Congressional Budget Office outlook projected wider deficits and higher debt levels over the next decade, with tariffs expected to push inflation back toward the Fed’s 2% target only by 2030. That backdrop adds another layer of complexity to rate expectations heading into Friday’s CPI report.
Here’s Our Take
Today reinforced a key theme: dispersion is high, and selectivity matters. The jobs report shows the economy remains resilient, but that resilience also complicates the case for near-term rate cuts. Higher yields, capex scrutiny, and AI disruption fears are creating sharp rotations beneath the surface.
The broadening trade hasn’t disappeared — but it’s becoming more selective. Cyclicals tied to real demand (energy, machinery, industrial tech) are holding up better than parts of software and mega-cap tech. With CPI on deck Friday, volatility is likely to stay elevated.
For now, the market isn’t breaking — but it’s clearly recalibrating. Investors are balancing strong earnings and AI-driven growth against rates, deficits, and shifting policy expectations. That tug-of-war will likely define the rest of the week.
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