The focus shifted to the US jobs report released at 8:30 AM from the barrage of news from the Middle East. February U.S. employment report showed a noticeable slowdown in hiring, with nonfarm payrolls falling by about 92,000, well below expectations for modest job growth. The unemployment rate edged up to 4.4% from 4.3%, pointing to some softening in labor market conditions. Part of the weakness was linked to temporary factors, including health-care strike activity that removed roughly 31,000 workers from payrolls, along with weather-related disruptions that may have weighed on hiring during the month.
Looking beneath the headline, several sectors posted declines, including construction, manufacturing, leisure and hospitality, and private education and health services, while a few areas such as financial activities and wholesale trade saw gains. Wage growth remained relatively steady, with average hourly earnings rising 0.4% on the month and about 3.8% year over year, suggesting pay pressures have not cooled significantly.
Overall, the report points to a softer labor market for February, though some of the weakness may prove temporary due to strikes and weather effects. Still, the combination of declining payrolls and a slightly higher unemployment rate raises questions about whether hiring momentum is slowing after a period of stronger job growth earlier in the year.
The other key story of the day was the continued run higher in the price of crude oil. After falling late yesterday away from the intraday high near $82.16, the initial move was to the downside to a low of $78.24. However, sellers turned to buyers and oil prices surged. The catalyst continues to be driven largely by escalating geopolitical tensions and fears of supply disruptions. Attacks on energy infrastructure and shipping routes in the Persian Gulf threaten flows through the Strait of Hormuz, a key chokepoint for global crude shipments.
As a result, WTI crude posted a gains of over 10% for the day and 35% for the week, marking one of the largest weekly advances in decades.
U.S. retail sales for January fell by 0.2%, a smaller decline than the -0.3% drop expected, after being unchanged in the prior month. Excluding autos, sales were flat, matching expectations, while the control group—used in GDP calculations—rose 0.3%, slightly stronger than the 0.2% forecast. Retail sales excluding autos and gasoline also increased 0.3%, pointing to somewhat firmer underlying consumer spending. On a year-over-year basis, retail sales were up 3.2%, indicating that while spending softened modestly in January, overall consumer demand remains relatively resilient.
There was a lot of Fedspeak today as the Fed will be heading into the blackout period at the end of day until the FOMC meeting on March 18:
Here’s what the key Fed speakers said today in response to the data and the oil impact on inflation.
Mary Daly (San Francisco Fed)
- Acknowledged the labor market weakness but urged caution against overreacting to one month of data — “don’t make more of it than one month of data”
- Flagged a dual problem: inflation above target AND oil prices rising from the Iran war — “both of our goals are risks now”
- Noted the two-month average job gain is still below the ~30K level needed to keep unemployment steady
Austan Goolsbee (Chicago Fed)
- Warned that oil price shocks from the Iran war “can lead in a stagflationary direction” — his most direct stagflation warning to date
- Still expressed optimism that rates will be “a fair bit lower” by end of 2026, but cautioned against moving too fast
- Remains a non-voter in 2026 but still influential
Stephen Miran (Fed Governor)
- Most dovish voice today — said the weak jobs number strengthens the case for cuts
- Argued the Fed should prioritize the labor market over inflation concerns: “I don’t think we have an inflation problem”
- Wants rates moved to near neutral, roughly a full percentage point below current levels
Beth Hammack (Cleveland Fed)
- Stayed hawkish — reiterated rates should remain on hold “for quite some time”
- Acknowledged two-sided risks but said her base case is holding until inflation convincingly moves lower
- Would not cut “if the meeting were tomorrow”
Jeff Schmid (Kansas City Fed)
- Echoed Hammack’s hawkish tone, flagging concern that tariffs and other policies could reignite persistent inflation
- Skeptical that labor market weakness alone justifies cutting while prices remain elevated
Susan Collins (Boston Fed)
- Maintained that the bar for further easing near term remains “relatively high”
- Warned additional monetary support risks stalling inflation’s return to 2%
- Favors holding steady “for some time”
Bottom line: The Fed is deeply divided. Miran is pushing hard for cuts, Daly and Goolsbee are worried about stagflation but open to easing later in the year, while Hammack, Schmid, and Collins are holding firm on the inflation fight. The March 18 meeting is shaping up to be a contentious one.
Looking at the markets, the USD moved lower helped by the weakness in the jobs report and perhaps the negative effect from higher oil prices especially for the lower to middle class of the K-economy. The dollar index is ending the day down -0.40% with declines vs the CHF (-0.61%) and the CAD (-0.81%) leading the charge. The GBP (-0.39%) and AUD (-0.33%) were also weaker.
The exception was the the JPY with the JPY falling vs the greenback by -0.15% as technicals helped to keep that pairs declines in check.
US stocks did not take the news well with the:
- Dow industrial average -453.19 points or -0.95% at 47501.55
- S&P index -90.69 points or -1.33% at 6740.02.
- NASDAQ index -361.31 points or -1.59% at 22387.68.
- Russell 2000 of small-cap stocks -60.27 points or – 2.33% at 2525.30.
For the trading week the largest declines were in the small cap Russell 2000 with a decline of -4%. The Dow 30 stocks shed 3% while the Nasdaq was the best performer with a decline of -1.24%. :
- Dow industrial average fell -3.01%.
- S&P index fell -2.02%.
- NASDAQ index fell -1.24%
- Russell 2000 index fell -4.06%
Yields today were mixed with the shorter end moving lower on the expectations the Fed might be forced to ease due to a slowing economy. The 2 year yield fell -3.6 basis points. The 30 year yield rose 0.9 basis point and the 10 year yield was near unchanged on the day. For the week, yields were sharply higher on the back of risk from higher inflation:
- 2 year yield +17.3 basis points
- 5 year yield +21.5 basis points
- 10 year yield +18.9 basis points
- 30 year yield +14.0 basis points.
