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The Market Wrap for January 26: Signs of a Softening Economy

Asif Imtiaz Jan 26, 2018

Markets didn’t react to the political drama on Capitol Hill, but the first signs of a potential slowdown in the labor market and the overall economy concerned investors. Meanwhile, the Dow managed to reach another record high, while tech stocks on NASDAQ continued their unstoppable bullish run.

Although the GDP growth rate in the U.S. is expected to come down from 3.2% in Q3 to 2.9% in Q4, the GOP’s decision to reduce corporate taxes will continue to solidify the private sector growth momentum. According to the latest quarterly World Economic Outlook report from the International Monetary Fund (IMF), the U.S. economy is set to grow 2.7% in 2018.

However, the Fed’s forecast of a slowdown in the labor market in the coming months and the reduction in quarter-over-quarter GDP growth rate kept short-term investors nervous this week. Also, the softening in existing home sales data didn’t help either. Next, a few large-cap companies missed their earnings estimates, sending the markets into a tizzy early in the week.

In the end, it was an uneventful week, but the blooming Q4 earnings season and a handful of important economic data releases will likely keep investors busy on Friday.

Be sure to check out our previous week’s edition here, in which the market paid no attention to the possibility of a government shutdown.

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