Stocks closed mostly lower on Friday, with only the Nasdaq eking out a small gain.

That's how they lined up for the week as well (Dow and S&P lower, Nasdaq slightly higher).

But all of the major indexes were down for the month, and down for the quarter.

Stocks opened higher on Friday after the Personal Consumption Expenditures (PCE) index showed core inflation remains on the decline. But those gains gave way as the UAW announced they were expanding their strike's work stoppages, and at the time, the likelihood that Congress would shut down. Although, we now know that crisis was averted. (More on those last two items in a bit.)

The PCE index, which is the Fed's preferred inflation gauge, showed headline inflation increase by 0.4% m/m vs. last month's 0.2% pace and views for 0.4%. On a y/y basis it was up 3.5% vs. last month's 3.4%, but in line with the consensus. The core rate (ex-food & energy) was up 0.1% vs. last month's 0.2% and views for 0.2%. On a y/y basis it came in at 3.9%, which was in line with the consensus, and down from last month's 4.3%.

It was a fine enough report. And largely what everyone was expecting.

Too early to tell if that will impact the Fed's outlook on rates when they meet again in November. But for now, core inflation continues to fall. And that bodes well for those hoping the Fed stands pat on rates where they are.

In other news, Retail Inventories were up 1.1% m/m vs. last month's upwardly revised 0.5%.

Wholesale Inventories were down -0.1% m/m, in line with the consensus, and an improvement vs. last month's -0.2% pace.

The Chicago PMI declined to 44.1 vs. last month's 48.7 and estimates for 47.9.

And Consumer Sentiment came in at 68.1, up from last month's 67.7 and views for the same.

The UAW expanded their work stoppages at GM and Ford on Friday, sparing further disruption to Stellantis, as they cited 'momentum' in talks. But just the other week, the UAW expanded their strike at GM and Stellantis, sparing Ford due to progress in talks at that time. Either way, today marks day 18 of the strike.

On Friday, it looked like the government would indeed shut down. But on Saturday, a stopgap funding bill was passed by Congress which gives lawmakers another 45 days (till November 17), to pass a new budget for the new fiscal year, which began on October 1. Crisis averted. For now.

With September behind us, the market can concentrate on Q4. And there's high expectations for a Q4 rally. That's because history shows if the market is up more than 10% thru July (which it was), and August is down (which it also was), the remainder of the year is up 100% of the time with an average gain of 9.9% (median of 8.7%).

So if the market is going to match its historical average (or median) listed above, it will need to climb roughly 5% just to get back to where it was at the end of August. And then add another nearly 9% to 10% on top of that.

If so, that suggests a big rally in Q4.

And Q4 trading starts today.

See you tomorrow,