Stocks closed higher yesterday, erasing Monday's losses, and then some.

Yesterday's Case-Shiller Home Price Index slipped -0.8% m/m (adjusted), which was in line with expectations. On a y/y basis it was up 6.8% vs. last month's 8.6% and views for 6.7%.

The Chicago PMI slipped to 44.3 vs. last month's 44.9 and views for 45.1.

And the Consumer Confidence Index came in at a solid, albeit lower, 107.1 vs. last month's upwardly revised 109.0 and views for the same.

But optimism over falling inflation, as referenced by the recent CPI, PPI and PCE readings, has been underpinning stocks since the start of the new year.

And that has many believing that the Fed, in addition to raising rates by only 25 basis points this afternoon, may also adopt a more dovish tone when it comes to how high they plan on raising rates this year, and how long they plan on keeping them there.

A 25 bps move would put the Fed Funds rate at a midpoint of 4.63%.

At their last meeting, they hinted that the terminal rate (the highest level they anticipate raising and holding rates at), could reach 5.10%. Since then, some Fed officials have suggested the Fed might need to go even higher.

If 5.10% is their target, they would only need to raise rates by another 25 basis points for each of the next two meetings (after today), to get to that level.

But fed fund traders are speculating that the Fed will call it quits between 4.75% ? 5.00%. If they're right, that would mean only one more 25 bps hike after this one.

So investors will be listening closely for any clues on how high rates might go and how long they might stay there.

The Fed makes their announcement at 2:00 PM ET. Then Fed Chair, Jerome Powell will give his customary press conference at 2:30.

Prior to the Fed news, we'll get MBA Mortgage Applications, the ADP Employment report, the Job Openings and Labor Turnover Survey report (or JOLTS for short), the PMI and ISM Manufacturing Index, and Construction Spending.

But the Fed will be the main event today.

We'll also get more earnings with 135 companies on deck ready to report.
This was one of the best January's in years. The Dow was up 2.83%, the S&P was up 6.18%, the Nasdaq was up 10.68%, and the small-cap Russell 2000 was up 9.69%.

A strong January bodes well for the rest of the year. Let's also not forget the favorable seasonality of the 4-year Presidential cycle which shows that year 3 (that's this year), is the best year of all 4 years. In fact, since 1950, stocks have always gone up in the year after midterms, with an average 12-month forward return of 18.6%.

So there's plenty of things to be excited about this year in terms of the market.

If inflation keeps declining, and the Fed can get us closer to a soft landing than not, it might turn out to be an exceptional year.

See you tomorrow,