Stocks closed higher yesterday on continuing trade deal optimism.

Negotiations between the U.S. and China entered their second day yesterday. There's lots of hope for progress between the #1 and #2 economies. While details are scarce, President Trump said he was getting "good reports" regarding the talks.

The market is also expecting to hear news on other trade deals in the coming weeks. The 90-day pause on reciprocal tariffs has 1 month left. So far, there's only been one signed deal with the U.K.

While it's doubtful we'll get 100+ signed deals in the next 30 days, the market is expecting to get at least a handful of deals from some of the bigger U.S. trading partners. There's roughly 15 of them. It's believed that deals are close with India, Japan and South Korea.

In other news, yesterday's NFIB Small Business Optimism Index rose to 98.8 vs. last month's 95.8 and views for 95.9.

Today we'll get MBA Mortgage Applications, the EIA Petroleum Status Report, the Treasury Buyback Announcement and the Treasury Statement (related to the trade deficit).

But the main event will be the Consumer Price Index (CPI ? retail inflation). The headline number is calling for a 0.2% m/m increase vs. last month's 0.2% pace, with the y/y rate increasing to 2.5% vs. last month's 2.3%. The core rate (ex-food & energy) is expected to come in at 0.3% m/m vs. last month's 0.2%, while the y/y rate is expected to tick up to 2.9% vs. last month's 2.8%.

These would be modest increases. Although, it would mark the first y/y increase in the core rate in three months. The March report showed inflation falling from 3.3% to 3.1%. The April report showed it falling from 3.1% to 2.8%. And May's report showed it holding steady at 2.8%.

So all eyes will be on this morning's CPI numbers.

While a better-than-expected inflation report is unlikely to move the Fed to cut rates at their next meeting on June 18^th, continued progress could see them step things up. At the moment, the CME's FedWatch tool has a 58% likelihood on a rate cut at their September 17^th meeting, bypassing their July 30^th meeting.

I should also note that the Fed is still expecting to cut rates two times this year. We'll see if the Fed still has that in their forecast when they meet next week.

In the meantime, the markets are all in the green for the week so far. That would make it 3 up weeks in a row if they were to finish the week that way.

Moreover, the S&P and Nasdaq are both within striking distance of their all-time highs with the S&P just 1.71% away, and the Nasdaq just 2.27% away.

A little bit of good news could get us over that threshold and begin a new leg up.

See you tomorrow,