Stocks closed mostly lower yesterday with only the Nasdaq eking out a small gain.

Yesterday marked the beginning of a new week, month, and quarter.

The markets have a lot to live up to, especially given how well they've performed over the last month(s) and quarter(s).

Yesterday was also the first full trading day for the market to respond to last Friday's Personal Consumption Expenditures (PCE) index. It came in mostly as expected with headline inflation up 2.5% y/y, up a bit from last month's 2.4%, but in line with expectations for 2.5%. The core rate (ex-food & energy) was up 2.8% y/y, which was just under last month's upwardly revised 2.9% (from 2.8%), and in line with views for the same.

While core inflation is still a ways away from the Fed's 2% target, it's well under 2022's peak of 5.3%.

The Fed is expected to hold rates steady when they meet again on April 30/May 1. But they are expected to finally begin cutting rates at their June 11-12 meeting.

We'll get three more inflation reports, however, before the next meeting.

We'll also get one more employment report. The employment report is an important data point the Fed considers when setting monetary policy given their dual mandate which requires them to keep prices stable (moderate inflation), but also to promote maximum employment.

The labor market has been incredibly resilient. So much so that Fed Chair Jerome Powell recently 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.

Fortunately, the unemployment rate doesn't have to rise before the Fed cuts rates. But the unemployment rate is a proxy for the economy. And the Fed is balancing between not cutting rates too soon, which could allow inflation to creep back up, and waiting too long which could bring "unneeded damage to the economy and the labor market."

So Friday's employment situation report will be watched and analyzed closely.

In other news, yesterday's PMI Manufacturing report came in at 51.9 vs. last month's 52.2, and the consensus for 52.5.

The ISM Manufacturing Index increased to 50.3 vs. last month's 47.8, and views for 48.3.

And Construction Spending slipped -0.3% m/m vs. last month's -0.2% pace, and estimates for 0.5%. On a y/y basis it came in at 10.7% vs. last month's 11.4%.

Today we'll get Motor Vehicle Sales, Factory Orders, and the Job Openings and Labor Turnover Survey report (or JOLTS for short).

In the meantime, we'll see if the market can regroup and build a base for its next leg up.

See you tomorrow,