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Week In Review: We’re Not Kitten

This week, the decline of the S&P 500 Index, an increase in UK inflation, the future of Sears and Kmart-and even perfume scents-got downright hairy.

A sharp sell-off for U.S. financial stocks helped drive the S&P 500 Index down more than 1% on Tuesday - its worst one-day performance since before Donald Trump's election victory in November. That was attributed in part to doubts over whether the Trump administration had adequate support in Congress to push through its fiscal stimulus plans.

The S&P financial sub-index sank 2.87%, its biggest daily fall since June. The drop amplified last week's losses in the sector after the U.S. Federal Reserve (Fed) hiked interest rates by 0.25 percentage points. While banks typically benefit from higher interest rates, the Fed's actions reflected a less aggressive stance than many investors had been expecting, and bank shares lost ground as a result.

Over the week to Thursday, the overall S&P 500 Index was down 1.36%. In the UK, the FTSE 100 slipped by 1.13%, while the FTSE World Europe (ex UK) fell by 0.36%.

UK inflation shoots past target

Rising fuel and food prices helped push last month's UK inflation rate to its highest since September 2013. Consumer price index inflation jumped to 2.3% in February, up from 1.8% in January, and lifting the rate above the Bank of England's 2% target.

Food prices recorded their first annual increase in more than two-and-a-half years, standing 0.3% higher in February than a year earlier. The Bank of England has said it expects inflation will peak at 2.8% next year, although some economists think the rate could rise above 3%.

The Brexit vote last June prompted a steep fall in the value of sterling, making imported goods more expensive. In particular, the fall in the pound against the dollar has pushed transport costs higher. Oil is priced in dollars, and sterling has fallen around 13% since last June's referendum.

But while inflation has been rising, wage growth has been slowing, leaving households worse off. The resultant slowdown in consumer spending is likely to deter the Bank from raising interest rates any time soon.

Sears' catalogue of woes

The corporate owner of Sears and Kmart, two of American retail's most iconic names, said on Tuesday that there was "substantial doubt" that it could continue operating. The announcement caused shares in Sears Holdings to tumble by more than 13% on Wednesday morning.

Sears - famed for its mail-order catalogue - has been a fixture in American shopping malls for more than a century, while Kmart grew from its roots as a Detroit "five-and-dime" store to emerge as a major national presence in the 1960s. But both brands have been squeezed by fierce competition from rivals such as Walmart and Target. Online retailing, with the rapid rise of the likes of Amazon, has presented a more recent - and arguably tougher - challenge to traditional brick-and-mortar department stores. As recently as a decade ago, there were roughly 3,800 Sears and Kmart stores in the U.S. and Canada. By January this year, that number had declined dramatically to 1,430.

In its annual report, Sears Holdings Corporation reported a $2.2 billion loss for last year and said it had to use money from its investments and financing activities to fund operations. "Our historical operating results indicate substantial doubt exists related to the company's ability to continue as a going concern," it said.

Since the two U.S. retail behemoths were combined 13 years ago, a restructuring operation has failed to stem the companies' decline. Sears has accumulated net losses of more than $10 billion over the past six fiscal years. Meanwhile, its shares have lost around 90% of their value during the past five years, driving its market capitalization below $850 million.

And finally…

Demeter Fragrance Library, a New York-based perfumer, has released a new scent especially for those cat lovers who want to smell litter-ally the same as their favorite animal. The company says its 'Kitten Fur' fragrance - which has been 15 years in the making - aims to capture the smell of the "PURRfect spot" just behind a kitten's neck and gives "the olfactory essence of warmth and comfort."

But if your initial reaction is "You've got to be kitten me," then fear not, the new cologne is indeed fur real. Other scents available on the website include Vanilla Cake Batter, Pipe Tobacco, Play-Doh and Paperback ("the musty smell of aged paper"). Who nose what they'll come up with next?

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Companies mentioned are for illustrative purposes only and are not intended to be a recommendation to buy or sell any security.

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