Stocks ended down on Friday, down for the week (3rd week in a row), down for the month, (2nd month in a row), and down for the quarter (3rd quarter in a row). Ugh.

Stocks got off to a rough start this year (worst start since 1970). Then had a spectacular summer rally in July and the first part of August. But then fell apart, with the selling accelerating after the Fed raised rates, and upped their projections for the terminal rate to get as high as 4.6% by early next year (from the roughly 4% that had been previously expected).

While inflation is down from its summer peak, it remains stubbornly high.

That was underscored by Friday's Personal Income and Outlays report which showed Personal Consumption Expenditures (PCE) (the Fed's preferred inflation gauge), rising a larger than expected 0.4% m/m vs. 0.2% expected, and 6.2% y/y vs. 6.1% expected. That's below June's 7.0% peak. But still too high. Core PCE was up 0.6% m/m vs. views for 0.5%, and 4.9% y/y vs. views for 4.8%.

In other news, the Chicago PMI declined to 45.7 vs. last month's 52.2 and views for 52.0.

And Consumer Sentiment slipped to 58.6 vs. last month's 59.5 and views for the same.

We've got a slew of economic reports on tap for this week, starting with today's ISM Manufacturing Index, and Construction Spending.

But the report everybody is waiting for is Friday's Employment Situation report.

As you know, the jobs market has been sizzling hot, with the unemployment rate at 50-year lows.

This report will be looked at closely to see if the recent rise in interest rates, which has slowed down economic activity to a degree, has impacted hiring. A large number could be interpreted bullishly or bearishly. (If the jobs market remains hot, that's good because it shows that talk of a deep recession is premature. But it can also signal that interest rates have not had much of an impact on slowing down the economy (and thus inflation), and the Fed will need to keep raising rates until it does.)

A small number could also be interpreted either way as well. A smaller number could show that rate rises are having an impact and is finally starting to cool the labor market (and soon inflation). But it could also signal trouble – with a labor market that was expected to remain hot for years, finally showing fatigue, that could foreshadow more economic pain is coming.

In the meantime, Q4 has now begun. For traders this is important because Q4 typically marks the best quarter of the year for stocks.

Moreover, it being a midterm year, Q4 is even more favorable. In fact, according to the Presidential Cycle, while the second and third quarters of midterm years are historically weak, Q4 of midterm years is the second-strongest quarter in the presidential cycle (sporting an average return of 6.6% since 1950), with the following quarter (Q1 of the next year), ranking as the strongest quarter of the presidential cycle, with a 7.4% average gain.

And when we factor in that the third year of the presidential cycle has historically witnessed the best performance of all four years, the outlook for stocks looks even stronger.

We'll see if any of this history repeats itself this year.

But it's nice to know what the cyclical tendencies are.

Let's see how the first trading day of Q4 does today.

See you tomorrow,