Stocks closed sharply higher yesterday with the big three indexes breaking out to new all-time highs.

Yesterday's in line Consumer Price Index (CPI) came as a relief to the market and confirmed that inflation is slowly starting to head back down.

Headline CPI was at 0.3% m/m, matching the consensus for the same, and coming in under last month's 0.4% pace. The y/y rate came in at 3.4%, also matching estimates, and coming in below last month's 3.5%. The core rate (ex-food & energy) rose 0.3% m/m, just like the headline number. They too were in line with the consensus, and under last month's 0.4%. The y/y rate came in at 3.6% as expected, and under last month's 3.8%.

Yesterday's CPI (retail inflation), and Tuesday's PPI (wholesale inflation), calmed fears of resurging inflation. In fact, it showed disinflation is back on.

While that's not likely to prod the Fed into lowering rates at their June meeting or even July, the odds for a September or November cut are looking better and better.

While the Fed is still forecasting 3 rate cuts this year (presumably by 25 basis points each), some are speculating there may only be 2. But either is better than some of the previous chatter that suggested none.

In other news, MBA Mortgage Applications rose 0.5% w/w, with purchases off -1.7%, but refi's up 4.7%.

The Housing Market Index slipped to 45 vs. last month's 51, and views for the same.

Retail Sales were flat (unchanged) last month. Ex-vehicles, they were up 0.2%. But ex-vehicles & gas, they were off -0.1%.

The Empire State Manufacturing Index fell to -15.6 vs. last month's -14.3, and estimates for -10.0.

And Business Inventories ticked lower by -0.1% m/m vs. last month's 0.3%, and views for 0.0%.

Today we'll get Weekly Jobless Claims, the Housing Starts and Permits report, the Philadelphia Fed Manufacturing Index, Import and Export Prices, and Industrial Production.

At the moment, the market is in a great spot. The economy is doing well. Estimates for corporate sales and earnings are on the rise. Inflation is starting to head back down, once again. And rates are likely to head lower later this year.

Moreover, the cyclical tendencies are on the market's side as well. I'm talking about the 4-year Presidential cycle that shows that year 4 (that's this year), is the second-best year of all four years (second only to year 3, which was last year). Simply put, stocks typically do well in Presidential election years. And this year is shaping up to be another winner as well.

We'll see if the market can add to their gains today after yesterday's upside breakout.

Either way, it looks like there's a lot more upside to go this year.

So make sure you're taking full advantage of it.

See you tomorrow,