Stocks closed mostly lower yesterday with only the S&P 500 eking out a tiny gain. But all of the indexes finished well off their intraday lows.

Yesterday's Producer Price Index (PPI ? wholesale inflation) came in hotter than expected. And was a bit of a surprise given Tuesday's more moderate CPI (retail inflation) report. The headline PPI was up 0.9% m/m vs. last month's flat reading (0.0%) and views for 0.2%. The y/y rate was up 3.3% vs. last month's 2.3% pace and estimates for 2.6%. The core rate (ex-food & energy) was up 0.9% m/m vs. last month's 0.0% and forecasts for 0.2%, while the y/y rate came in at 3.7% vs. last month's 2.6% and expectations for 3.0%.

Tuesday's core CPI came in at a more modest 3.1%, up from last month's 2.9%, but down one tenth of a percent from the 3.2% rate we ended 2024 at.

Core PPI at 3.7%, which is up from last month, is also up four tenths of a percent from last year's end of 3.3%.

But stocks mostly shrugged off the higher print. And that's likely for a couple of reasons. For one, PPI saw a bigger increase than CPI, which suggested producers/businesses are absorbing more than they are passing on to consumers. Second, tariffs are only up modestly for the year, and not the elevated increases that so many worried about earlier in the year. And three, the Fed is still expecting to cut interest rates this year. While they were forecasting 2 rate cuts by year's end (presumably by 25 basis points each), there's now speculation of a larger rate cut of 50 basis points when the rate-cutting cycle resumes. Just like the Fed started the first series of rate cuts last year with a 50 bps cut, they might very well kick off this next rate cut-cutting cycle the same way.

We'll get another look at inflation two weeks from now on August 29^th, with the Personal Consumption Expenditures (PCE) index (which is the Fed's preferred inflation gauge).

The Fed meets 2½ weeks later on September 16-17. Odds for a rate cut at this next meeting are at 92.6%.

In other news yesterday, Weekly Jobless Claims fell by -3,000 at 224,000 vs. the consensus for an increase to 230K. The smoother 4-week moving average came in at 221.75K vs. last week's 221K.

Today we'll get Retail Sales, the Empire State Manufacturing Index, Import and Export Prices, Industrial Production, Business Inventories, and Consumer Sentiment.

And more earnings with another 54 companies on deck to report.

With 1 more day to go, all of the indexes are solidly in the green for the week, so far. And if they can finish out the week that way, that'll make it 2 up weeks in a row for all of them.

Best,