The market correction took on a new tone last week after a much hotter than expected CPI report. The consumer price index rose by 0.6% from last month and 7.5% from last year to set the fastest pace of price increases in four decades. The news compounds other data that point to aggressive interest rate hikes from the FOMC. The odds of at least two 25 basis point hikes have risen to near 75% for the March meeting, up significantly from an expectation of no rate hikes in March just a month or two ago.

This week will bring a raft of economic data including retail sales and the PPI. Retail sales are expected to increase on a YOY basis but much if not all of the increase will be due to inflation. The risk is that consumer activity is on the decline due to rising prices and may come in short of expectations. If the PPI data is hot as well it will only increase the outlook for inflation, FOMC interest rate hikes, and worsen the outlook for corporation earnings power.