Stocks closed lower yesterday, giving up their intraday gains and ending the S&P's 6-day winning streak and the Nasdaq's 5-day streak.

After a great rally, not just over the last week, but over the last several weeks, stocks were bound for some profit taking. And we saw a little bit of that yesterday.

There was likely some position squaring too, ahead of today's FOMC Announcement, Q2 GDP numbers, and earnings from Microsoft and Meta.

The Fed is widely expected to keep interest rates unchanged this afternoon. But you can be sure everybody will be listening to Fed Chair Jerome Powell's Press Conference afterwards, hoping to hear any clues as to whether the Fed might be ready to cut rates at their next meeting in September.

While inflation has actually gone down over the last several months, defying worries that inflation would go up due to increased tariffs, the Fed has remained cautious. But all the while they have maintained that they still see two interest rate cuts this year. We will see if that's still the case today.

We'll also get the advance estimate for Q2 GDP. You'll remember that Q1 came in at -0.5%, which was heavily skewed due to a rush of imports into the U.S. to beat the increase in tariffs. (An increase in imports vs. exports can depress GDP numbers.) But Q2 is expected to come in at 2.5%. If so, that should quash the misguided recession worries once and for all.

We'll also hear from two of the Magnificent 7: Microsoft and Meta after the close. They will be judged not just on their sales and earnings, but also on what they say regarding AI and their buildout plans. Their investments in AI have been looked at as a signal that the AI trade is alive and well.

Tomorrow we'll hear from two more Mag 7 constituents: Apple and Amazon.

Tomorrow we'll also get another look at inflation with the Personal Consumption Expenditures (PCE) index, which is the Fed's preferred inflation gauge. Another report showing inflation easing, or at least any tick up as being muted, is too late for this month's FOMC announcement. But it will help in shaping what the Fed does at their next meeting in September and the two others in October and December.

And a very busy week will culminate with Friday morning's always important Employment Situation report. The last couple of reports have come in better-than-expected. That has not helped the case for rate cuts. But more importantly, it has shown that the economy is resilient. And short-term noise notwithstanding, a strong and resilient economy is good for the market.

The markets cheered last week's trade deal with Japan, along with other deals that had been announced previously. The market also cheered (or at least was relieved) at the Sunday announcement for a deal with the E.U. The August 1^st deadline will be here on Friday. Any country without an agreement will see their reciprocal tariffs go up. The hope is that a deal with Mexico and Canada (our second and third biggest partners behind the E.U.) get done in time. The deadline for China (fourth largest partner), who we have a framework agreement with, but still need to work out some details, isn't due until August 12^th.

While the rally paused yesterday, there's still plenty of week left (not to mention earnings and economic reports), to see more green.

See you tomorrow,