Stocks closed sharply higher on Friday and for the week.

After the S&P experienced their worst week of the year the previous week, they experienced their best week of the year last week, gaining 2.67%. The Nasdaq Composite was up even more with 4.23%.

Strong earnings have been a factor all week in lifting stocks. After-hours earnings from Microsoft and Alphabet on Thursday sent shares soaring on Friday.

And more positive EPS surprises on Friday morning from a host of names like Autoliv (positive EPS surprise of 12.9%), Moog (positive EPS surprise of 28.8%), and Newell Brands (positive EPS surprise of 100%), to name a few, added to the rally.

The market also shrugged off Friday's Personal Consumption Expenditures (PCE) index showing inflation coming in slightly higher than expected. The headline number came in at 0.3% m/m, which was in line with expectations. But the y/y rate rose to 2.7% vs. last month's 2.5% and views for 2.6%. The core rate (ex-food & energy) was also up 0.3% m/m as expected, while the y/y rate matched last month's 2.8%, but was above the consensus for 2.7%.

But given the previous CPI and PPI reports, which showed disinflation slowing, the PCE report was no real surprise. And stocks continued their rebound.

The pullback that began just a few short weeks ago, appears to have run its course, and the market is attempting to build a new base from which to begin its next leg up.

That does not mean it will be without volatility. I expect there will be plenty. Especially given this week's FOMC announcement on Wednesday.

Virtually nobody is expecting the Fed to cut rates this week as the odds have shifted to September for their first cut. But all eyes will be on the Fed as they lay out their thoughts on the current state of inflation and the economy, and therefore their expectations on rate cuts.

In other news, Friday's Consumer Sentiment report showed the index slipping to 77.2 vs. last month's 77.9 and views for the same. The year-ahead inflation expectations (which is also a part of that report), came in at 3.2% vs. last month?s 3.1% and the consensus for 3.1%.

Earnings season continues this week with another 1,249 companies on deck to report, including marquee names like NXP Semiconductors, Arch Capital, and MicroStrategy on Monday; Amazon, Eli Lilly and Advanced Micro Devices on Tuesday; Mastercard, Qualcomm, and CVS on Wednesday; Apple, Novo Nordisk, and Booking Holdings on Thursday; and Berkshire Hathaway, Hershey, and Cheniere Energy on Friday, amongst many others.

The Dow is now only -3.94% below their all-time closing high from last month; the S&P is only -2.95% below their all-time closing high from last month; and the Nasdaq is off by just -3.13% from their all-time closing high from earlier this month.

And if the rest of earnings season shapes up like what we've seen so far, we could be at new highs before you know it.

See you tomorrow,