Stocks closed lower on Friday, and mostly lower for the week, except for the small-cap Russell 2000, which was up for the week, making it their 4th up week in a row. But all of the major indexes were up for the month, making it their 4th up month in a row, and fifth for the Nasdaq.

YTD, the Dow is up 7.05%, the S&P 500 is up 9.84%, the Nasdaq is up 11.1%, the Russell 2000 is up 6.11%, and the mid-cap S&P 400 is up 4.27%.

On Friday, we got the latest inflation report with the Personal Consumption Expenditures (PCE) index (the Fed's preferred inflation gauge). It came in as expected. The headline number was up 0.2% m/m, in line with the consensus and up a bit vs. last month's 0.3%. On a y/y basis it was up 2.6%, as expected, and the same as last month. The core rate (ex-food & energy), was up 0.3% m/m, in line with expectations and last month's pace. And the y/y rate was up a bit at 2.9% vs. last month's 2.8%, but in line with estimates.

Friday's inflation report packed no surprises. And the Fed is widely expected to cut rates later this month when the Fed concludes their 2-day FOMC meeting on September 17^th. The likelihood of a cut jumped to 86.4% after Fed Chair Jerome Powell's, Jackson Hole speech, the previous week. He finally acknowledged that a rate cut at the September FOMC meeting might be warranted, citing that labor market risks have increased vs. inflation. And that the "base case" remains that the recent price increases (which are showing up in moderate rises in inflation), will be a "one-time" shift due to tariffs, rather than ongoing increases.

We still have the next Employment Situation report to get thru on Friday (9/5). But short of a dramatic increase in new jobs, it's looking like the Fed is on pace to finally resume their rate-cutting cycle.

But the questions to be answered are, will it be 25 basis points or a larger 50 basis points, similar to how the Fed kicked off their rate-cutting cycle in 2024? And will this really be the beginning on a new rate-cutting cycle, or a one-and-done cut followed by a pause to observe the effects?

Friday's employment report could have an impact on what the Fed decides. So, all eyes will be on that on Friday.

This week we'll see if the markets can start the new month off by building on last month's gains.

Today we'll get the Construction Spending report and the ISM Manufacturing Index.

We'll also get some additional earnings this week from companies like Zscaler, Salesforce and Broadcom to name a few.

But Q2 earnings season officially ended last Wednesday with NVIDIA's earnings after they reported a quarterly EPS growth rate of 54% and a sales growth of 56%. While NVIDIA was down modestly after the report, it was a stellar report no matter how you slice it, marking their 10th positive EPS surprise out of the last 11 quarters.

Their report, in addition to confirming their remarkable growth, showed that the AI trade is alive and well, and the demand for chips, datacenters and other AI related products does not seem to be slowing. In fact, the soaring demand for AI related products is unprecedented. And is likely to help fuel this historic rally far into the future. Not just for NVIDIA, but for other tech and AI-related names.

See you tomorrow,