Stocks closed higher yesterday, gaining back most of Wednesday's late-day pullback.

The Dow remains above last year's all-time high. And the S&P is now just 1.51% away from eclipsing theirs.

Yesterday's third and final Q3 GDP estimate came in at 4.9%, down from the second estimate of 5.2%, but in line with the first estimate of 4.9% from two months ago.

Weekly Jobless Claims fell -2,000 to 205,000 vs. the consensus for 210,000.

The Philadelphia Fed Manufacturing Index came in at -10.5 vs. last month's -5.9 and views for -3.0.

The Kansas City Fed Manufacturing Index was at -1 vs. the prior level of -2.

The Leading Indicators report was down -0.5% m/m, which was in line estimates, and an improvement from last month's pace of -1.0%.

And Corporate Profits (after tax) rose 0.1% y/y vs. their last time out of 0.5%. With inventory and adjustments it was down -2.1% vs. -1.7% previously.

Today we'll get Durable Goods Orders, New Home Sales, and Consumer Sentiment.

But the report everyone is really looking forward to is the Personal Consumption Expenditures (PCE) index, which is the Fed's preferred inflation gauge. The headline number is expected to come in at -0.1% m/m, and 2.9% y/y vs. last month's 3.0%. The core rate (ex-food & energy), is expected to be up 0.2%, the same pace as last month, while the y/y rate is expected to dip to 3.4% vs. last month's 3.5%.

If so, this would show a continuing decline in inflation, just like the recent CPI and PPI reports earlier this month.

As you know, the Fed essentially said no more rate cuts, barring any unforeseen circumstances. And they pivoted to expecting 3 rate cuts next year (likely 25 basis points each), vs. the 2 rate cuts they had previously forecast. Although, the market expects between 4-5 rate cuts, and for those to start sooner (March), rather than later.

Either way, another good report would underscore the greater easing stance.

But even if we got a slight uptick in inflation, the writing is pretty much on the wall. Rates are likely coming down next year. It's just a matter of how much and when.

In the meantime, the Q4 rally continues on.

There's now just 5 more trading days left in 2023 (markets will be closed on Monday for Christmas).

But these are not throwaway days. While December (mostly over), is typically a strong month, the last half of the month is typically where the best gains come from.

And technically, the Santa Claus rally doesn't even start until Tuesday, and goes thru the first 2 trading days of January.

So there's plenty of opportunity for more upside before year's end.

As for 2024, that's looking to be just as exciting as 2023, with high expectations for another strong performance.

But before that, let's get thru today.

Have a great weekend, and a very Merry Christmas.

See you on Tuesday,