Stocks closed higher again yesterday. The S&P 500 and Nasdaq both made new all-time highs again. But the leading index, once again, was the small-cap Russell 2000 with an outsized gain of 1.98%. That comes on top of Tuesday's 2.99%.

It looks like the long-awaited breakout in small-caps in finally underway.

Tuesday's Consumer Price Index (CPI -- retail inflation) report helped lift stocks. While inflation ticked up, it did so only modestly. Not the elevated increase that the Fed has been worrying about since the beginning of the year. In fact, the annual core rate (ex-food & energy), came in at 3.1%, which was up two tenths of a percent last month, but is actually down a one tenth from the 3.2% rate we ended 2024 at.

The moderate inflation readings are increasing the chances that the Fed resumes their interest rate cuts sooner rather than later. With the Fed still forecasting 2 cuts this year (presumably by 25 basis points each), and only 3 FOMC meetings remaining this year (September, October and December), it would appear these cuts are just around the corner.

And the markets, especially the small-caps, are not wasting any time in starting to price that in. Especially since they usually borrow at less favorable terms than larger companies. So interest rate cuts will definitely have a favorable impact on small-caps.

We'll get another look at inflation this morning with the Producer Price Index (PPI ? wholesale inflation). The headline rate is expected to be up 0.2% m/m vs. last month's 0.0%, while the y/y rate is forecast at 2.6% vs. last month's 2.3%. The core rate is estimated to be up 0.2% m/m vs. last month's 0.0%. The y/y rate last month came in at 2.6%.

In addition to today's PPI report, we'll also get Weekly Jobless Claims.

And we'll get more earnings with another 187 companies on deck to report including Deer & Company, NetEase and JD.com before the open, and Applied Materials and SanDisk, to name a handful, after the close.

With 2 more days to go, all of the indexes are solidly in the green for the week so far. If they can finish out the week that way, that'll make it 2 up weeks in a row for all of them.

See you tomorrow,