Equity markets plunged last week after hotter-than-expected inflation data put the fear of higher interest rates back into the market. The January read of the PCE Price Index shows inflation accelerated on a month-to-month basis as expected and accelerated versus last year. This contradicts the belief that inflation is subsiding and may lead the FOMC to hike rates by another 50 basis points at the next meeting. The risk for the market is the FOMC will do something to shock the market, such as a more aggressive than expected interest rate hike or posture at the next FOMC meeting.

The risk for the market this week is all earnings-related. The bulk of S&P 500 companies have already reported, but this week brings several reports from major retailers and a host of small and mid-cap favorites. The takeaway to date is the outlook for 2023 is deteriorating, and that trend may accelerate by the end of the week.