Stocks closed higher again yesterday with solid gains across the board. It was also the 4th up day in a row for both the S&P and Nasdaq.

With just one more day to go, all of the indexes are on pace to close higher for the week.

Yesterday's Producer Price Index (PPI) wholesale inflation report came in slightly better than expected. The headline number was up 0.2% m/m vs. last month's 0.1% and views for 0.2%. The y/y rate came in at 1.7%, which was down from last month's 2.2% and estimates for 1.8%. The core rate (ex-food & energy) was up 0.3% m/m vs. last month's 0.0% and views for 0.2%. The y/y rate came in at 2.4%, which was in line with last month.

Between Wednesday's CPI and yesterday's PPI, the Fed looks likely to cut interest rates by 25 basis points when they meet next week on 9/17-18. In fact, that's what the Fed Funds traders appear to be predicting as they have a 72% probability that the Fed cuts by a quarter point vs. just 28% for a half point.

Of course, the bigger debate will be what happens next in November and December? And what is their terminal rate forecast?

While some are predicting a full percentage point cut in total by early next year (which means a 25 basis point cut in Sep., Nov., Dec., and Jan.), some believe we could see a full percentage point cut by year's end, which means two 25 bps cuts and one 50 bps cut within the remaining three FOMC meetings this year.

We'll get more insight next week. But it looks like the time has finally come for the rate cut cycle to begin.

Speaking of interest rate cuts, the European Central Bank (ECB) yesterday cut rates by 25 basis points, making it the second rate cut so far this year, putting their rates (the deposit rate) at 3.50%. Inflation has eased over there like in the U.S., but their economy is weaker with a forecast of just 0.8% growth this year in comparison 2% for the U.S.

In other news, Weekly Jobless Claims rose by 2,000 to 230K as expected.

Today we'll get Import and Export Prices, Consumer Sentiment, and the Baker Hughes Rig Count report.

After a shaky start to the month, the big 3 indexes are close to erasing MTD losses. And it won't take much to get in the green for the month.

And then of course, we have Q4 to look forward to, which is historically the best 3 months of the year.

It's been a fantastic year so far, and the odds are looking good for a strong finish.

See you tomorrow,