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Stocks were mixed yesterday with the Dow, small-cap Russell 2000, and mid-cap S&P 400 in the red, while the S&P 500 and Nasdaq were in the green, with each notching yet another new all-time high close. That makes 4 new all-time high closes in a ro
Kevin Matras   
Profit from the Pros
By Kevin Matras
Executive Vice President
Zacks Investment Research

S&P And Nasdaq Make Another New All-Time High Close As Inflation Falls More Than Expected

Stocks were mixed yesterday with the Dow, small-cap Russell 2000, and mid-cap S&P 400 in the red, while the S&P 500 and Nasdaq were in the green, with each notching yet another new all-time high close. That makes 4 new all-time high closes in a row.

The markets, once again, breathed a sigh of relief yesterday after another better-than-expected inflation report.

This time it was the Producer Price Index (PPI) (wholesale inflation). The headline number showed inflation actually falling by -0.2% m/m vs. last month?s 0.5% and views for 0.1%. On a y/y basis it was up 2.2% vs. last month's 2.3% and estimates for 2.5%. The core rate (ex-food & energy) was flat (0.0%) m/m vs. last month's 0.5% and expectations for 0.3%. On a y/y basis it was up 2.3% vs. last month's 2.5% and the consensus for 2.4%.

The day before, the market exhaled after the Consumer Price Index (CPI) (retail inflation) came in better-than-expected. Headline inflation was up 3.3% y/y vs. last month's 3.4% and views for the same. The core rate was up 3.4% y/y vs. last month's 3.6% and estimates for 3.5%.

After several months of stalled progress on inflation, it was nice to see it start heading back down again.

Of course, the Fed wants to see more evidence that inflation indeed is back on the path to their target of 2%. Wednesday afternoon's FOMC Announcement said as much.

Gladly, this week's CPI and PPI reports fit that bill.

Later in the month we'll get the next inflation report which is the Personal Consumption Expenditures (PCE) index (the Fed's preferred inflation gauge).

After a few more months of seeing inflation continuing to head lower, the Fed should be ready to pull the trigger. The Fed suggested only 1 rate cut on the docket for this year. But you never know. If inflation continues to fall at the pace it fell in these latest reports, we could very well see double that.

However, it should be noted that the economy and the market are doing just fine without rate cuts.

While consumers and traders will likely cheer when they finally come, there's no urgent need for rate cuts at this very moment.

In other news, yesterday's Weekly Jobless Claims rose 13,000 to 242K vs. the consensus for 222K. Although, the smoother 4-week moving average came in at 227K vs. last week's print of 222.25K.

Today we'll get Import and Export Prices, and Consumer Sentiment.

And we'll hear from Fed policymakers Lisa Cook (Fed Governor), and Austan Goolsbee (President of the Federal Reserve Bank of Chicago), as they speak at their respective engagements throughout the day.

With one more trading day left in the week, all of the indexes (except for the Dow) are on pace to close higher for the week. And the Dow doesn't need much more to go to do the same.

But the S&P 500 and Nasdaq are the biggest winners this week as big-tech continues to impress while the AI boom shows no signs of slowing.

If the S&P and Nasdaq can make another new all-time high close today, it'll be a clean sweep as they will have managed to do so every single day of the week this week.


Kevin Matras

Executive Vice President, Zacks Investment Research


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