The big three indexes closed lower on Friday. And all of the major indexes closed lower for the week, making it 3 down weeks in a row for the Dow, 2 for the S&P and Nasdaq, and 1 for the small-cap Russell 2000 and mid-cap S&P 400.

Last week's CPI (retail inflation) and PPI (wholesale inflation), came in a bit above expectations, but does not change the narrative of how inflation has eased significantly over the last 12-24 months.

Granted, there is some concern over how soon inflation will hit the Fed's 2% target (the core (ex-food & energy) Personal Consumption Expenditures (PCE) index, which the Fed's preferred inflation gauge, is currently at 2.8%), but it's not that far away. And it's fallen far more from 2022's peak of 5.3%, than it has left to go to get to 2%.

We'll get the next look at the PCE index next week on Friday, March 29.

In the meantime, we'll get the Fed's FOMC Announcement this week on Wednesday, March 20, followed by Fed Chair, Jerome Powell's customary press conference afterwards.

They are expected to begin the discussion on when to start cutting rates. Whether they come to a conclusion or not is TBD. But the discussion is to begin, and we'll see if Mr. Powell can provide any insight as to how those talks went, and what the timeline looks like.

Even though inflation has not yet hit the 2% target, and the Fed's previous forecast for this year is to 'only' see it fall to 2.4% (and 2.1% in 2025), many believe it has fallen enough to start cutting rates.

If one were to assume that 100 basis points above inflation is the natural rate (aka the neutral rate), to allow growth, but keep inflation steady, then bringing rates down to 3.80% is where things should be now, which is -158 basis points below current midpoint levels of 5.38%. That suggests far more than the 3 quarter-point rate cuts the Fed is forecasting. And shows the Fed has plenty of room to cut rates while also keeping monetary policy restrictive enough to bring down inflation ever further.

The FOMC Announcement comes out on Wednesday at 2:00 PM ET, followed by Mr. Powell's Press Conference at 2:30.

In other news, Friday's Empire State Manufacturing Index fell to -20.9 m/m from last month's -2.4%, and views for -8.0.

Industrial Production rose 0.1% m/m vs. last month's -0.5% and views for a flat 0.0%. Manufacturing Output rose 0.8% vs. last month's -1.1% and views for 0.0% as well. And the Capacity Utilization Rate came in at 78.3%, even with last month's 78.3% and just under estimates for 78.4%.

And the Consumer Sentiment report came in at 76.5, down a bit from last month's 76.9, and under the consensus for 77.3. The year-ahead inflation expectations (which is also part of the report), was steady at 3.0%, in line with last month's reading and views for the same.

We've got a busy week of economic reports out this week, as always. But the main event will be Wednesday's FOMC Announcement.

At the moment, the major indexes YTD are up 2.72% for the Dow, 7.28% for the S&P 500, 6.41% for the Nasdaq Composite, 0.6% for the small-cap Russell 2000 Index, and 5.11% for the mid-cap S&P 400 Index.

And in spite of recent volatility, it looks like there's a lot more upside to go.

See you tomorrow,