Stocks closed mostly lower on Friday, but sharply higher for the week, making it two up weeks in a row for all of the indexes.

Last week's Consumer Price Index (CPI - retail inflation), and Producer Price Index (PPI - wholesale inflation) showed inflation creeping up, but more moderately than the elevated increase the Fed has been worrying about.

Tuesday's core (ex-food & energy) CPI came in at 3.1% y/y, but is still down two tenths of a percent vs. the 3.3% pace we saw just a few months ago. And core PPI at 3.7% y/y, is only one tenth of a percent above their recent print of 3.6% a few months back.

And the markets largely cheered the news, as it looks like the expected interest rate cuts are still on track. The Fed is projecting two interest rate cuts this year (presumably by 25 basis points each). And with only three more FOMC meetings left in the year (September, October and December), that means two of those three should see a cut.

Currently, the likelihood of a September rate cut is pretty high at 92.1%.

Either way, the market is forward-looking. And the market does not seem to be wasting any time in acting on that.

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.

In other news, Friday's Retail Sales were up 0.5% m/m vs. last month's upwardly revised 0.9% (from 0.5%), and views for 0.5%. Ex-Vehicles it was up 0.3%. Ex-Vehicles & Gas it was up 0.2%.

The Empire State Manufacturing Index rose to 11.9, more than doubling last month's print of 5.5 and estimates for just 0.5.

Industrial Production was off -0.1% m/m vs. last month's 0.4%. Manufacturing Output was flat (0.0%) vs. last month's 0.3%. And the Capacity Utilization Rate came in at 77.5% vs. last month's 77.7%.
Business Inventories were up 0.2% m/m vs. last month's 0.0%. Manufacturing Inventories were up 0.2% vs. last month's 0.1%. Retail Inventories were up 0.2% vs. last month's 0.3%. And Wholesale Inventories were up 0.1% vs. last month's -0.3%.

And Consumer Sentiment slipped to 58.6 vs. last month's 61.7 and the consensus for 62.1. The year-ahead inflation expectations (which is part of that report) ticked up to 4.9% vs. last month's 4.5%.

This week we'll get the usual slate of economic reports.

And earnings season continues with 271 companies on deck to report including Palo Alto Networks today, Home Depot and Medtronic tomorrow, Target and Analog Devices on Wednesday, Walmart and Intuit on Thursday, and BJ's Wholesale Club on Friday.

Hard to believe there's only 4½ months left in the year. But what a year it's been so far. The S&P and Nasdaq are both sitting near all-time highs. The Dow is within striking distance of theirs. And it looks like the small-cap Russell 2000 is finally getting ready to embark on its long-awaited upside breakout.

And I'm expecting stocks to finish the year on a strong note.

With the AI trade alive and well, additional tax cut provisions for corporate America, including the 100% immediate cap-ex expensing, and expected interest rate cuts, I'm expecting another 20%+ gain this year. And given the S&P is 'only' up 9.66% YTD, that potentially means another 10.3% gain (or more) from here.

So, make sure you're taking full advantage of it.

See you tomorrow,