Stocks closed mostly lower yesterday, except for the tech-heavy Nasdaq, which added 0.18%, and making another new all-time high in the process. The S&P 500 also made a new intraday all-time high, albeit briefly, before finishing off -0.40%.

News that NVIDIA will soon be able to sell their H20 semiconductor chips in China (which were once forbidden) sent the stock to record highs yesterday, gaining 4.04% on the day. Investors cheered the news, and see it as a win, not just for NVIDIA, but also for the broader AI trade as it underscores the demand for AI.

That sentiment was furthered by Google announcing it will invest $25 billion in AI data centers over the next two years to help power the U.S. electric grid. That was part of a larger $90 billion package the President touted, which is dedicated to AI infrastructure and energy investment.

In other news, yesterday's Consumer Price Index (CPI -- retail inflation) showed the headline number rose 0.3% m/m, up from last month's 0.1%, but in line with expectations. The y/y rate came in at 2.7%, up from last month's 2.4% and views for 2.6%. The core rate (ex-food & energy), was up 0.2% m/m vs. last month's 0.1% and expectations for 0.3%. The y/y rate ticked up to 2.9% vs. last month's 2.8%, but in line with the consensus for 2.9%.

All in all, inflation did tick up. But for context, the core rate at 2.9% remains four-tenths of a percent lower than the 3.3% it was at back in January, and only one-tenth higher than the 2.8% we saw over the last 3 months, which happened to be the lowest reading since March 2021.

We'll get another look at inflation today with the Producer Price Index (PPI ? wholesale inflation). The consensus is for the headline number to tick up 0.2% m/m vs. last month's 0.1%, but the annual rate is expected to ease to 2.5% vs. last month's 2.6%. The core rate is expected to be up 0.2% as well vs. last month's 0.1%, while the y/y rate falls to 2.7% vs. last month's 3.0%. If so, the annual core rate would be at its lowest reading since January 2023.

Before the open yesterday, JPMorgan Chase reported a positive EPS surprise of 9.98%, and a positive sales surprise of 2.52%. Same for Citigroup, which posted a positive EPS surprise of 21.7%, and a positive sales surprise of 3.26%. And Wells Fargo, with a positive EPS and sales surprises of 9.22% and 0.57% respectively. Although, Citigroup was the only one that finished in the green by the close.

Today we'll hear from another 40 companies set to report, including more banks like Bank of America, Morgan Stanley, and Goldman Sachs.

After sharp gains over the last two months, there was bound to be some profit taking.

We could very well see more.

But the outlook for the economy looks bright. And I'll cite Cleveland Federal Reserve President, Beth Hammack, who said that the U.S. economy is "really healthy."

I see the outlook for the market being bright also. With the AI trade alive and well, additional tax cut provisions for corporate America, and expected interest rate cuts in the coming months, it looks like there's a lot more upside to go.

I'm expecting another 20% gain this year. And given the S&P is 'only' up 6.16% YTD, that potentially means another 14% gain from here.

See you tomorrow,