US equities rally as fourth earnings season starts

US equities ended at record highs while the ICE US dollar index retreated in the second week of 2018 as the fourth quarter earnings season started. The SP 500 rallied 1.6% and the ICE dollar index fell 1.1% for the week.

The SP 500 closed at record highs every session last week except Tuesday. It closed at all-time high Monday rising 0.1% as the consumer borrowing rose $7.4 billion to $27.9 billion in November over month, the largest monthly increase in 16 years. The broad market ended 0.7% higher at new record Friday as retail sales rose 0.4% in December, with sales excluding cars increasing an above-expected 0.4%.

The ICE dollar index retreated in every session except Monday and Tuesday last week. It gained 0.4% Monday on hawkish comments of Federal Reserve officials the Fed should hike rates three or four times in 2018 with US economy running strong. The dollar index added 0.4% on Tuesday from a rise in long term Treasury yields after the Bank of Japan cut purchases of long-dated debt by 5% overnight. The dollar fell 0.5% Thursday as producer-price index fell 0.1% in December though the core PPI, excluding food and energy, rose 0.1%. Dollar ended 1% lower Friday as headline inflation remained at 2.1% in December while core inflation accelerated to 1.8% from 1.7%. Faster core inflation points to accelerating economic recovery.

Germany coalition government talks, China’s growth data and Canada central bank’s policy decision will be in focus this week. The Bank of Canada’s interest rate decision is due Wednesday, and China will release fourth quarter GDP, December industrial production Thursday.