Stocks closed higher on Friday with the Nasdaq and small-cap Russell 2000 leading the way with gains of 1.14% and 1.05% respectively.

Except for the Dow, all of the indexes were up for the week, making it 2 up weeks in a row for the Nasdaq and S&P 500, and a whopping 8 weeks in a row for the mid-cap S&P 400.

Last Thursday's Personal Consumption Expenditures (PCE) index (the Fed's preferred inflation gauge), came in as expected, showing headline inflation easing to 2.4% y/y vs. last month's 2.6%; and the core rate (ex-food & energy) coming in at 2.8% vs. last month's 2.9%.

We'll get two more pieces of inflation data before the next FOMC meeting on March 19-20: the Consumer Price Index (CPI) on March 12, and the Producer Price Index (PPI) on March 14.

Even if these next two reports continue to show inflation on the decline, it's highly unlikely the Fed will be cutting rates in March. They all but came out and said so. But it will definitely help inform the discussion the Fed is expected to have in March on when the first rate cuts might begin.

In other news, Friday's PMI Manufacturing report showed the index at 52.2 vs. the consensus for 51.5.

The ISM Manufacturing Index came in at 47.8, down from last month's 49.1 and views for 49.5.

Construction Spending slipped -0.2% m/m vs. last month's upwardly revised 1.1% (from 0.9%), and estimates for 0.2%. On a y/y basis it's up 11.7% vs. last month's upwardly revised 14.4% pace (up from 13.9%).

And Consumer Sentiment slipped as well with the index at 76.9 vs. last month's 79.6, and views for the same. The year-ahead inflation expectations (which is also part of the report), remained unchanged at 3.0%.

The next big economic report on the horizon is Friday's Employment Situation report. This too is a key indicator the Fed watches.

While wage inflation has eased, and the red hot jobs market has cooled a bit, it remains strong. Last year, Fed Chair Jerome Powell remarked with seeming incredulity (given the Fed's historic rate hike cycle), that rates have risen to 5% while the unemployment rate is still so low.

We'll also get more earnings this week with another 785 companies on deck to report.

It's been a great start to the year: the Dow is up 3.71%; the S&P 500 is up 7.70%; the Nasdaq Composite is up 8.42%; the small-cap Russell 2000 is up 2.43%; and the mid-cap S&P 400 is up 4.64%.

And it looks like there's a lot more upside to go this year.

See you tomorrow,