Dancing in the dark

• Japan's Nikkei surged following Takaichi's election win, while the yen posted its biggest gain in over a year, though investors remain cautious about her planned fiscal spending details
• U.S. nonfarm payrolls rose by 130,000 in January, nearly double forecasts, reversing earlier expectations for an April Fed rate cut that had reached 50-50 odds after weak retail sales
• Tech giants plan $650 billion in capex for 2026 while governments prepare fiscal expansion despite massive debt burdens, raising questions about the rationale for continued Fed easing with inflation above the 2% target

Market Summary: Week of February 13, 2026

Key Market Movements

Tech stocks declined sharply, with the Nasdaq Composite dropping 2% following disappointing Cisco Systems earnings. Apple experienced its largest single-day drop of 5% since April 2025's "Liberation Day" tariff announcement. Transportation stocks also suffered from AI disruption concerns.

Japan Political Development

Prime Minister Sanae Takaichi's Liberal Democratic Party secured a landslide victory in lower house elections. The Nikkei surged on Thursday, while Japanese government bonds and the yen strengthened—the yen posting its largest gain in over a year. However, analysts warn investors may be overly optimistic, as details of Takaichi's planned fiscal spending could reignite market volatility.

U.S. Economic Data

Mixed signals complicated Federal Reserve rate expectations. December retail sales were weak, initially pushing April rate cut odds near 50-50. However, January payrolls showed 130,000 jobs added—nearly double forecasts—though concentrated in healthcare with significant 2025 downward revisions. Inflation remains above the Fed's 2% target, raising questions about continued easing despite massive government debt and tech companies planning $650 billion in capex for 2026.

Currency and Energy Markets

The dollar showed persistent weakness against the euro and yuan over the past year. Oil prices remained rangebound near $70/barrel despite geopolitical concerns. The International Energy Agency forecasts global oil demand will exceed previous estimates, projecting a significant supply glut.

Market Outlook

The week highlighted uncertainty across markets, with traditional economic models struggling to predict outcomes amid political shifts, AI disruption, and fiscal expansion despite elevated debt levels. Investors await upcoming CPI data for inflation guidance.