Equity markets were flat last week as fear of inflation was refreshed. Not only did the Fed's outlook for short and long-term inflation get increased but several members came out with commentary to the effect that inflation is yet to be tamed, interest rates are still rising and there is a risk to the economy. Adding to the downward pressure was weaker than expected earnings from the retail sector and a weak read on the index of leading indicators.

In regard to retail earnings, the major retailers are indicating much of this year's strength has been seen and that Q4 could be disappointing. In regard to the index of leading indicators, it retreated by -0.8 points versus the expected -0.4 and came with a downward revision to the previous month's negative reading. The take here is that economic activity has been showing signs of contraction for many months and those signs are getting stronger and stronger.