Market Action

Stocks recorded their first weekly loss of 2018. The S&P 500 Index suffered its worst weekly drop in two years. Rising yields and inflationary fears are cited as main culprits; however, valuation and political fears should not be discounted as additional reasons for the decline.

As of February 2, just over half of the companies in the S&P 500 Index have reported earnings for the fourth quarter of 2017. Data and analytics firm FactSet raised its estimate for overall fourth-quarter earnings growth for the S&P 500 to 13.4% on a year-over-year basis.

US President Donald Trump’s national security team was considering possibilities for the government to build a 5G wireless network to counter China spying on phone calls, an administration official said on Sunday. On Monday White House spokeswoman Sarah Sanders stated that discussions were at “the very earliest stages” and “absolutely no decisions” have been made.

Japan reported its PMI reached its highest level in nearly four years in January, increasing to 54.8 from 54.0 in December. In January the Eurozone PMI came in at 59.6, slightly below the previous month’s record 60.6. The US manufacturing index held at 59.1, down slightly from 59.3, and China saw a downtick to 51.3 from 51.6.

Annual GDP in the EU rose to 2.5% in 2017-the strongest level in a decade-and EU growth outpaced both U.S. and UK GDP growth in 2017.

Janet Yellen presided over her final meeting of the rate-setting Federal Open Market Committee on Wednesday, leaving rates unchanged. Yields continue to firm along the curve, with the 30-year bond exceeding 2.8%.

India is going to miss its budget deficit targets due to initiatives to uplift underdeveloped regions and create jobs before next year’s national elections. The budget shortfall will be 3.5% in the year ending March 31, Finance Minister Arun Jaitley told lawmakers in New Delhi, wider than the previous 3.2% estimate. Bond yields rose and the rupee fell following the announcement.

Mexico’s GDP expanded in Q4 at an annualized 1.8% pace during the period, resulting in growth of 2.1% for all of 2017. The Mexican economy has continued to grow despite uncertainties over trade with the U.S. (the destination of 80% of its exports) and despite two destructive quakes that shook the country in September.

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Source: Recode