Stocks closed lower yesterday, continuing last week's decline.

The markets opened higher yesterday, and proceeded to notch their best levels shortly thereafter. But those gains were short-lived. And by the afternoon, all of the indexes were in the red.

An early morning relief rally, after a better than expected outcome following Iran's weekend attack on Israel, gave way to other concerns, namely inflation.

Last week's CPI and PPI reports showed disinflation slowing. And that's led some to believe that we might not see any rate cuts this year.

The Fed, however, is still forecasting 3 rate cuts in 2024 (presumably by 25 basis points each). But Fed Chair Jerome Powell maintains the Fed will be data dependent. And so far, the data has not been on the side of near-term rate cuts, which has pushed the timeline out to June at the earliest.

After June, the Fed then has to grapple with any interest rate changes looking political given it's an election year. Between that, and slowing progress on inflation, some are making the case that cuts won't come until after the election in November. That would leave just 2 FOMC announcements left on 11/7, and then on 12/18.

All of the above is speculation, of course. Nonetheless, there's only 6 more Fed meetings in total this year. And nobody is expecting a rate cut at the one concluding on May 1. And odds are only at 22.5% for the June 12 meeting.

Of course, if inflation starts heading back down, or if labor slows, that could shorten the timeline. The next inflation report is the Personal Consumption Expenditures (PCE) index, which comes out on April 26. The next Employment Situation report comes out on May 3 (two days after the May 1 Fed announcement).

In other news yesterday, Retail Sales were up 0.7% m/m, under last month's 0.9%, but above the consensus for 0.4%. Ex-vehicles and gas, it was up 1.0% vs. last month's 0.5% and views for 0.3%.

The Empire State Manufacturing Index fell to -14.3. That was an improvement from last month's -20.9, but below estimates for -5.1.

Business Inventories rose 0.4% m/m, in line with estimates and above last month's 0.0%.

And the Housing Market Index came in at 51, the same as last month, and the consensus.

Today we'll get the Housing Starts and Permits report, and Industrial Production.

We'll also hear from Jerome Powell as he joins a discussion at the Washington Forum on the Canadian Economy, in Washington, D.C.

Earnings season has 'unofficially' begun. Some of the big banks have already reported, such as Goldman Sachs yesterday. And there are more big banks on deck with Bank of America, Morgan Stanley, and PNC Financial reporting today, U.S. Bancorp going tomorrow, and the Blackstone Group and KeyCorp reporting on Thursday. But earnings season 'officially' begins tomorrow when Alcoa reports after the close.

Earnings season is always an exciting time since stocks typically go up during earnings season. And that would be nice given the recent volatility.

In the meantime, we'll see if stocks can stabilize today and find some support.

See you tomorrow,