The US markets were mostly down last week after a short trading week due to the US markets being closed for Presidents’ Day.

The FOMC minutes from the January 29th and 30th meeting were released last Wednesday and indicated that more members are showing increased concern over the continuation of the Fed’s role in QE (quantitative easing). Several of the FOMC members indicated that the Fed should be prepared to slow the pace of their bond purchasing program. Even more members indicated concerns about the potential for long-term rising interest rates/inflation.

It’s important to remember that the Federal Reserve has a dual mandate to maintain stable prices and maximize employment. Therefore, many analysts are beginning to say that the Fed is overemphasizing their focus on maximum employment at the expense of long-term price instability (inflation). Based upon the meeting minutes reported last week, this risk/concern is finally showing up within the FOMC meetings.

The Q4 2012 earnings season is almost over. According to Thomson Reuters data through Thursday of last week, 427 companies have reported earnings with about 70% of them beating analysts’ expectations. However, some analysts are concerned over what the Q1 2013 earnings season will bring now that the payroll tax cut has expired; taking away an additional 2% from consumers spendable income.

Attention will now shift to the looming sequestrations that will take effect on Friday, March 1st (barring any unexpected last minute agreement between Republicans and Democrats). Sequestration will result in budget cuts totaling $85 billion between March 1st and September 30th, 2013. Economists are NOT in agreement on the long-term impact of sequestration. However, both Republicans and Democrats seem to be in agreement that it will have mostly negative impacts on the economy but cannot agree on better terms for responsible spending cuts. Therefore, only time will tell how the US economy and stock markets will be affected by the broad spending cuts.