Stocks closed mostly higher yesterday with the big three indexes all in the green. The Dow led the rally yesterday with a 0.61% gain.

Yesterday's Consumer Price Index (CPI) retail inflation report came in a bit better than expected. Not as good as Tuesday's PPI report. But good enough in that it showed continued progress on inflation coming down. The headline number was up 0.2% m/m vs. last month's -0.1% and views for 0.2%, while the y/y rate came in at 2.9% vs. last month's 3.0% and views for the same. The core rate (ex-food & energy) was up 0.2% m/m vs. last month's 0.1% and estimates for 0.2%. The y/y rate came in at 3.2% vs. last month's 3.3% and the consensus for 3.2%.

While the PPI report showed the annual core rate at 2.4%, which continues to inch closer to the Fed's 2% target, the annual core CPI rate still has a 3-handle.

The next inflation report comes out on August 30^th with the Personal Consumption Expenditures (PCE) index, which is the Fed's preferred inflation gauge. The last PCE report showed the annual core rate at 2.6%.

They all have fallen significantly from their summer peak two years ago. But they are not at the Fed's target yet. Of course, the Fed has said numerous times that it doesn't have to hit 2% for them to begin cutting, they simply need enough confidence to believe it's on its way to 2% to begin cutting. And in order to gain that confidence, they need to see "more good" data that shows that.

Note, however, that the Fed is not only looking at inflation. They are also looking at the labor market. They would like to see a continued slowing of the jobs market, but not too much. They are looking for a soft landing. And a slowly cooling jobs market is that. But a rapidly deteriorating jobs market will spook the market (as the last one did), while a hotter than expected jobs market could prolong the Fed's decision to cut.

We still have a few more weeks to go before the next employment report on 8/6. But that will be closely watched as it will be the last employment report the Fed gets before they meet on September 17-18.

In other news yesterday, MBA Mortgage Applications rose 16.8% w/w with purchases up 2.8%, and refi's up 34.5%.

Today we'll get Weekly Jobless Claims, Retail Sales, the Philadelphia Fed Manufacturing Index, the Empire State Manufacturing Index, Industrial Production, Business Inventories, Import and Export Prices, and the Housing Market Index.

We'll also hear from Alberto Musalem, the President and CEO of the Federal Reserve Bank of St. Louis, and Patrick Harker, the President of the Federal Reserve Bank of Philadelphia, as they speak at their engagements today.

And we'll get more earnings with another 133 companies on deck to report including Walmart, Deere and JD.com before the open, with Alibaba, Applied Materials and H&R Block going after the close.

And, of course, we'll see if the market can keep their rebound rally alive.

See you tomorrow,