Stocks closed lower yesterday after spending a good portion of the day in the green.

Likely position squaring ahead of this morning's Personal Consumption Expenditures (PCE) index, which is the Fed's preferred inflation gauge, weighed on shares late.

The PCE headline numbers are expected to show inflation up 0.2% m/m vs. last month's 0.1% pace, while the y/y rate is expected to tick down to 2.1% vs. last month's 2.2%. The core rate (ex-food & energy) is expected to be up 0.3% m/m vs. last month's 0.1%. The y/y rate is expected to tick down to 2.6% vs. last month's 2.7%.

Yesterday's advance estimate for Q3 GDP, which came in at 2.8%, was slightly below the prior rate of 3.0% and views for the same, but the PCE portion (also part of the GDP report) for Q3 (annual rate) came in at 3.7%, which was higher than the previous 2.8% and consensus for 3.0%. Granted, that's in the rearview mirror. But it might have spooked some. Especially after the CEO of BlackRock, Larry Fink, on Tuesday said he does not believe the Fed will cut rates as much as some are expecting, contending that inflation is embedded more now than we've ever seen in the world. So all eyes will be on this morning's PCE report.

Early morning earnings by Eli Lilly didn't help as they posted a negative EPS surprise of -22.4%, and a negative sales surprise of -4.92%. They were down -6.28% on the day. AbbVie, on the other hand, posted a positive EPS surprise of 2.74%, and a positive sales surprise of 1.29%. They were up 6.36% on the day. But that did not translate to broader support for the market.

After close we heard from Microsoft, and they posted a positive EPS surprise of 7.14%, and a positive sales surprise of 1.82%. That equated to a quarterly EPS growth rate of 10.4% vs. this time last year, and a sales growth of 16.0%. They were up 0.13% in the regular session before earnings, and up roughly 0.60% in after-hours trade following earnings.

We also heard from Meta, which posted a positive EPS surprise of 16.2%, and a positive sales surprise of 0.95%. That showed a quarterly EPS growth rate of 16.2% vs. this time last year, and a sales growth of 18.9%. They were off -0.25% in the regular session before earnings, and down roughly -1.75% in after-hours trade following earnings.

Today we'll get another 261 companies on deck to report, with Uber and Bristol Myers going before the open, and Apple and Amazon posting after the close.

In other news yesterday, MBA Mortgage Applications showed the Composite down -0.1% w/w with Purchases up 5.0%, but Refi's down -6.3%.

Pending Home Sales were up 7.4% m/m vs. last month's 0.6% and estimates for 1.0%. The Index itself came in at 75.8 vs. last month's 70.6.

We also got the ADP Employment report which showed private payrolls at 233,000 vs. last month's 159,000 and the consensus for just 115,000.

That report got a lot of attention, given the huge upside surprise. And with the Employment Situation report by the Bureau of Labor Statistics (BLS) coming out tomorrow (which will be the last labor report the Fed gets before their FOMC meeting next week on November 6-7), that too could have an impact on the Fed's decision on rates.

So, after today's PCE inflation report, everyone will shift their focus to tomorrow's BLS Employment report.

See you tomorrow,