By Megan Leonhardt

Hints of a Hike. Data dependency is not just for Federal Reserve officials these days, it seems. Investors proved today that they are willing to take their wins where they can these days -- even if that's on the basis of some positive economic indicators.

The Dow Jones Industrial Average rose 130 points, or 0.3%. The S&P 500 closed up 0.6%. The Nasdaq Composite gained 0.8%.

That was helped along by some positive signs in the economic data released today.

December durable goods orders fell 1.4%, but that was essentially in line with consensus call. Total housing starts, however, ended the year on a much stronger than expected note -- likely due to the warmer weather in much of the country. Other data released today also showed that January industrial production increased 0.7% month over month -- ahead of estimates for 0.4%.

Meanwhile the minutes from the Fed's January policy meeting were published this afternoon and did reiterate that signaled rate cuts are likely off the table for a while. While officials are still monitoring labor conditions, there seemed to be a renewed focus on sticky inflation that remains above the Fed's 2% target. In fact, some of the meeting details were a bit more hawkish than Powell's post-meeting presser had indicated.

"While 'several policymakers see scope for further easing if inflation declines as expected, 'some would favor holding steady for some time, and a subset of these would not ease until disinflation is firmly back on track. Notably, 'several' participants would have supported a two-sided statement explicitly keeping rate hikes on the table if inflation remains above target," writes Gregory Daco, EY-Parthenon's chief economist.

Daco points out that sets up an interesting dynamic if and when President Trump's nominee Kevin Warsh is confirmed as Fed chair.

The Hot Stock: Meta Platforms +6.5% The Biggest Loser: Tesla -8.2%

Best Sector: Consumer Discretionary +1.2% Worst Sector: Utilities -1.2%

Modeling the Right Approach

The Federal Reserve takes a lot of heat over a lot of things. And some of it is justified. But the Fed also has a massive purview that essentially amounts to keeping the economy afloat. It's a bit more nuanced than that, of course, but when the economy isn't firing on all cylinders, or a particularly corner of it is looking grim, the Fed is usually the first to hear about it.

But the U.S. economy is a complicated one, with a lot of moving parts. That's why Fed policymakers (and pretty much every economist) use models to help figure out the most plausible outcomes as various trends develop. Those models are by no means perfect -- and they're constantly getting refined and recalibrated.

But the Fed's approach to decision-making and the models used to determine the path of interest rates have been under fire by President Trump and his allies for years. The latest critiques, my colleague Nicole Goodkind writes, chastise the Fed for relying excessively on backward-looking data, as well as failing to account for the fact that productivity gains from artificial intelligence and deregulation could be deflationary.

As a result of these allegedly faulty models, interest rates are higher than they should be, contend officials like Gov. Stephen Miran and nominee Kevin Warsh.

But are the Fed's models really that skewed? Fed Chair Jerome Powell has rejected such critiques. "As somebody on the inside, they just don't make sense," he said, in answer to a question from Nicole at his most recent press conference in late January.

But of course he would. Still, right now, a lot of the critiques seem like political posturing to offer some justification for lower rates. And only time will tell which side of this debate is right.

Yet let's take a look at the backward-looking data argument. There's been a lot of folks grumbling that the Fed is too data dependent and should use more forward-looking indicators. Well, unless you've got a reliable crystal ball, analyzing trends within economic datasets and models are the best bet.

Of course, those models do have to calibrate the inputs correctly. And that's the next prong of the attack -- that the Fed staff simply isn't doing that correctly. This, of course, can be skewed by different viewpoints and historical lessons learned. But Fed Gov. Michael Barr said Tuesday that "there are lots of inputs" to underlying models. That's right, the Fed doesn't just rely on one model or even a handful. Like the data, they try to look at everything.

When it comes to the effects of higher productivity, for example, looking across the totality of the research thus far generally shows that when productivity increases, "potential output goes up, growth goes up, business investment goes up. There's more demand for business investment. The savings rate falls because people are anticipating larger lifetime earnings," Barr said.

All of that suggests a higher rate of inflation, Barr said. Of course, this time may be different. And that's why the Fed continues to tweak and polish and challenge its approaches and models. But so far, it seems like based on these models, Fed officials are making decent calls amid a complicated landscape.

The Calendar

Akamai Technologies, CenterPoint Energy, Comfort Systems USA, Consolidated Edison, Copart, Deere, EPAM Systems, Evergy, Extra Space Storage, Live Nation Entertainment, Newmont, Pool Corp., Quanta Services, Southern Co., Targa Resources, and Walmart announce earnings.

The National Association of Realtors releases its Pending Home Sales Index for January. The PHS Index, a leading indicator of housing activity, is expected to increase 2.5% month over month, after plummeting 9.3% in December.

What We're Reading Today

   -- Meet Hazel, the AI Tool That Sparked a Stock Market Selloff 
 
   -- The Stock Market Needs a Spark to Ignite a Real Rally. What Could Light 
      It. 
 
   -- Bitcoin Price Falls. Why Cryptos Are Struggling to Make a Comeback. 
 
   -- Warren Buffett Just Left His Final Clues for Investors. What Berkshire's 
      Stock Moves Say. 
 
   -- Oil Prices Rise. Vance Warned Military Action Remains an Option After 
      U.S.-Iran Talks. 

Barron's Live returns on Monday. Barron's Live features timely and actionable insights for investors. We give you behind-the-scenes conversations with the newsroom, connecting you with our editors and reporters covering the markets, the economy, and more.

Sign up here

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

February 18, 2026 20:00 ET (01:00 GMT)

Copyright (c) 2026 Dow Jones & Company, Inc.