Stocks closed higher yesterday. The mid-cap S&P 400 and small-cap Russell 2000 led with gains of 1.18% and 1.03% respectively.

The S&P 500 and the Nasdaq, which both made new all-time highs on Friday and Monday, took a breather yesterday. And all, but the Nasdaq, are up for the week so far. But the Nasdaq is just four-tenths of a percent behind.

The dominant news yesterday was the reconciliation budget bill. It finally passed the Senate. And now it goes back to the House for them to vote on the changes that were made from its original passage.

Whether one is for or against it, the extension of the 2017 tax cuts (assuming it passes the lower chamber) takes a degree of uncertainty away. And could be why the small-caps and mid-caps saw outsized rallies yesterday. For businesses, a reversal of the corporate tax cut provisions, had they not passed, and left to expire, would likely hit smaller companies the hardest.

Fed Chair Jerome Powell spoke yesterday at the European Central Bank forum in Sintra, Portugal. His comments that the Fed would likely have cut rates already, had it not been for policy uncertainty regarding tariffs, were interesting, but not new. What was new, however, was his acknowledgement that the Fed might begin cutting rates as early as this month when they meet on July 29-30. Although, he pivoted to the Fed being data dependent, which has been the Fed's mantra for a while now.

Nonetheless, his comments square up with Federal Reserve Governor Christopher Waller, who recently said that he believes the Fed could begin lowering rates as early as July's meeting as well. The odds are still for a September cut with the odds at 92.7%. But a couple more reports showing inflation continuing to ease could tilt the odds into July's favor, which currently stand at just 21.2%.

Either way, there's only 4 more meetings left in the year (July, September, October and December). And according to the Fed, they still plan on cutting two more times (presumably by 25 basis points each). So half of those remaining meetings should see cuts.

That too, likely lifted the small and mid-caps yesterday as well.

In other news, yesterday's PMI Manufacturing Index improved to 52.9 vs. last month's 52.0 and views for the same.

The ISM Manufacturing Index rose to 49.0 vs. last month's 48.5 and estimates for 48.8.

Construction Spending slipped -0.3% m/m vs. last month's -0.2% and the consensus for 0.1%. On a y/y basis, it came in at -3.5% vs. last month's -2.8%.

And the Job Openings and Labor Turnover Survey report (or JOLTS for short) showed 7.769 million job openings last month, up from the previous month's 7.395M and expectations for 7.300M.

Today we'll get MBA Mortgage Applications, the Challenger-Job Cut report, and the ADP Employment report.

But the report everybody is really waiting for is tomorrow's Employment Situation report. That comes out a day early, given the shortened holiday trading schedule.

The market is closed on Friday in observance of the July 4^th Holiday. But it also closes early on Thursday, at 1:00 ET.

The next two days (today and tomorrow), should be busy ones.

But if all goes well, we'll see the market notch another up week. And if so, that'll make it the 2nd up week in a row for the S&P 500, and the 3rd up week in a row for all the others.

See you tomorrow,