Stocks closed mixed yesterday with the Dow and the S&P 500 ending slightly lower, while the Nasdaq ended slightly higher. But the small-cap Russell 2000, and the mid-cap S&P 400 both finished with moderate gains of 0.50% and 0.43% respectively.

With last week's Employment report behind us, which was stronger than expected, but maybe not as strong as the headline number would suggest, the focus will shift back to inflation this week.

On Wednesday, 4/10, we'll get the Consumer Price Index (CPI) inflation report. And on Thursday, 4/11, we'll get the Producer Price Index (PPI) inflation report.

Last month's CPI and PPI showed disinflation slowing. But it remains sharply below peak inflation from nearly two years ago.

Wednesday's headline CPI is expected to show a small increase in y/y inflation (3.5% vs. last month's 3.2%), given the recent rise in energy prices. But the core rate (which excludes energy and food), is expected to be down, coming in at 3.7% vs. last month's 3.8%.

Fed Chair, Jerome Powell, maintains he still sees three rate cuts this year (presumably by 25 basis points each). But others have suggested it could be less, and begin later than expected. And Minneapolis Fed President, Neel Kashkari, said it was possible we could see no rate cuts this year if inflation continues "moving sideways." But Chief Economist at Goldman Sachs, Jan Hatzius, believes as Mr. Powell does, that three rate cuts is still the plan, adding he would be "very surprised" if we got none this year.

Either way, the Fed insists it will remain data dependent. So every report matters. And why all eyes will be on this week's inflation numbers.

Currently, Fed Funds traders have a 51.3% odds of a rate cut in June. We'll see if that changes after Wednesday.

Traders are likely looking forward to putting this week's inflation reports behind them, and focusing on next week's official start to earnings season, especially since stocks typically go up during earnings season.

In the meantime, today we'll get the NFIB Small Business Optimism Index.

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

See you tomorrow,