Stocks fell again on Thursday, capping off a second straight losing week. The S&P 500 dropped 2.1%, while the Nasdaq Composite was off by 2.6% and the Dow was down 0.8%.

Given the key data this week pointing to higher inflation, the broader moves down in the major averages shouldn’t come as a surprise. It may be too early to call a peak in inflation, but it is possible that the worst is behind us and we will be on the lookout for signs of inflation peaking in subsequent reports. With earnings season now upon us, we’re looking forward to updates from management teams that have deeper insight into the current economic environment than these backward-looking readings tend to offer. It's actually soothing to observe that inflation did NOT come up as a source of concern for bank CEOs when they discussed economic outlook earlier this week. 

Under the hood this week, the energy sector led to the upside, followed by utilities and consumer staples. In line with the rise in interest rates, technology led to the downside, followed by communication services and consumer discretionary.

Here’s a quick look at some of the broader market measures we like to keep an eye on: The U.S. dollar index is holding around the 100 level. Gold has advanced to the upper-$1,900s region. WTI crude prices pushed back above the $100 per barrel level and the yield on the 10-year Treasury has advanced to the 2.8% level.

Before getting to next week’s reports, a quick look at the actions we took this week:

• Sold some shares of Wells Fargo, bought some Morgan Stanley instead.

• Exited position in Eli Lilly entirely.

• Bought additional shares of Danaher, Procter & Gamble.

• Initiated a position in Cortera, a natural gas company. 

Earnings and the economy

Within the portfolio, we received earnings releases from Wells Fargo (WFC) and Morgan Stanley (MS) (see report here).  On the macroeconomic front:

Tuesday

• Consumer Price Index (CPI) YoY: +8.5% vs. +8.4% expected

• Core CPI YoY: +6.5% vs. +6.6% expected

Wednesday

• Producer Price Index (PPI) YoY: +11.2% vs. +10.6% expected

• Core PPI YoY: +7% vs. +6.5% expected

Thursday

• Weekly initial jobless claims: 185,000 vs. 172,000 expected; four-week moving average for claims: 172,250 (+2,000 vs. prior week)

• Retail Sales MoM: +0.5% vs. +0.6% expected 

What’s Ahead

Within the portfolio, next week we’ll hear from Procter & Gamble (PG) on Wednesday before the opening bell; Danaher (DHR) and on Thursday before the opening bell.

Here are some other key reports we will be watching:

Monday

• Open: Bank of America (BAC), BNY Mellon (BK), Synchrony Financial (SYF)

Tuesday

• Open: Johnson & Johnson (JNJ)

• Close: Netflix (NFLX)

Wednesday

• Open: ASML (ASML)

• Close: Tesla (TSLA), United Airlines (UAL), Lam Research (LRCX), 

Friday

• Open: American Express (AXP)