Stocks closed modestly lower yesterday after both the S&P and Nasdaq opened at new all-time highs.

It was a relatively narrow trading day ahead of this afternoon's FOMC Announcement when the Fed is widely expected to cut rates.

Odds are at 96.1% for a 25 basis point cut, while only 3.9% for a 50 bps cut.

As unlikely as it is for a 50 bps cut, it would not be unprecedented. In fact, last September when the Fed kicked off their rate-cutting cycle, they surprised with a 50 bps cut, and then followed it up with two more 25 bps cuts in subsequent meetings.

We'll find out soon enough. But the question that is likely on most people's minds is what happens next? The Fed had previously forecast 2 rate cuts this year (presumably by 25 bps each). But given the recent tame inflation reports, and the weaker-than-expected labor market, there's plenty of speculation that we could get as many as 3 rate cuts this year (September, October and December).

Or, they could surprise the market and suggest it's a one-and-done cut, opting to pause before their next move to see how things go.

The Announcement comes out at 2:00 PM ET. But it's the Fed Chair Press Conference by Jerome Powell at 2:30 that everyone will be waiting for. And that's when analysts and investors will parse his every word he says trying to glean what might be coming next.

In other news, it was reported yesterday that India described recent trade talks with the White House as "positive." That was encouraging to hear after the Administration levied as high as 50% tariffs on India (a 25% penalty on top of the 25% reciprocal tariffs already imposed) for buying Russian oil.

On the economic report front, yesterday's Retail Sales report was up 0.6% m/m vs. last month's upwardly revised 0.6% (from 0.5%) and views for 0.3%. Ex-vehicles it was up 0.7% vs. last month's upwardly revised 0.4% (from 0.3%). And ex-vehicles & gas it was up 0.7% vs. last month's upwardly revised 0.3% (from 0.2%).

Industrial Production was up 0.1% m/m vs. last month's -0.4% and estimates for 0.0%. Manufacturing Output was up 0.2% vs. last month's -0.1% and estimates for 0.1%. And the Capacity Utilization Rate came in at 77.4% vs. last month's 77.4% and views for the same.

Business Inventories were up 0.2%, in line with last month and the consensus. Manufacturing Inventories were up 0.3% m/m vs. last month's 0.2%. Retail Inventories were up 0.2%, in line with last month. And Wholesale Inventories were up 0.1% vs. last month's 0.2%.

And the Housing Market Index was steady at 32, in line with last month, but just under expectations for 33.

Separately, it was reported that mortgage rates hit a 3-year low yesterday ahead of the Fed's expected rate cut.

Today, in addition to the FOMC Announcement and Fed Chair Press Conference, we'll also get MBA Mortgage Applications, the Housing Starts and Permits report, and the Atlanta Fed Business Inflation Expectations.

But the main event will be the Fed this afternoon.

In the meantime, stocks are sitting near all-time highs or YTD highs. And it looks like there's a lot more upside to go.

See you tomorrow,