• Domestic equities rebound

• 10-year Treasury yield moves slightly higher

• Markets adjusting to “perceived” inflationary pressures

• Q4 earnings growth best since 2011

The release of both the Consumer Price Index and Producer Price Index (CPI & PPI respectively) last week were interpreted by the Street as confirming the wage growth numbers in the jobs report of two weeks ago. That is, prices are indeed rising. We are not so quick to draw that conclusion as we are looking at three data points, not necessarily a trend. Our managers will continue to monitor the data.

The yield on the 10-year Treasury bond did close slightly higher for the week at 2.88% after moving above 2.90% during weekly trading. The Federal Reserve has signaled 3 rate increases in short rates this year, and currently the consensus expectations are that an increase at next month’s meeting is highly probable. The Street believes the probability of two additional rate hikes during 2018 is above 50%.

The Q4 earnings season is now 80% complete and earnings releases continue to be abundant. As of now, earnings growth for the S&P 500 is over 15% (year-over-year basis) for the quarter, the highest since late 2011. Earnings prospects remain favorable as do market fundamentals.

The FOMC releases minutes from their January meeting on Wednesday. Existing Home Sales data for January is also reported Wednesday. Leading economic indicators are releases on Thursday.     

Next week continues a heavy reporting calendar for corporate earnings:

Tuesday – Medtronic, Home Depot, Duke Energy, Walmart, and Transocean

Wednesday – Advance Auto Parts, Cheesecake Factory, Pandora Media, Avis Budget Group, and Wendy’s

Thursday – Magna International, Lending Tree, and Newmont Mining

Friday – Royal Bank of Canada, Cabot Oil & Gas, and Geox

Saturday – Berkshire Hathaway

Indices for the week and YTD are as follows:

S & P 500 up 4.30% for the week; YTD index return is +2.19%

NASDAQ Composite up 5.31% for the week; YTD index return is +4.87%

Dow Jones Industrial Average up 4.25% for the week; YTD index return is +2.02%

Benchmark 10-year Treasury bond yield stands at 2.88% - advancing 2 basis points on the week