Stocks closed solidly higher yesterday after Wednesday's rate cut by the Fed. The S&P 500 was up 0.48%, while the Nasdaq gained 0.94%. But the small-cap Russell 2000 soared by 2.51%! And the mid-cap S&P 400 was up 1.30%.

The Fed cut rates by the expected 25 basis points. But they pleasantly surprised when they forecasted 2 more rate cuts by year's end (presumably by 25 basis points each), vs. the 1 additional rate cut that was anticipated.

Moreover, they notched up their expectations for growth, both this year and next. And they only slightly increased their inflation expectations, with Fed Chair Jerome Powell reiterating that "the pass-through of the tariffs into inflation has been slower and smaller." And that "the case for there being a persistent inflation outbreak is less."

He also noted that "the labor market has softened." (Hence the cuts.) But he expects the job market to firm up (likely as a result of the cuts), as he sees slightly lower unemployment next year.

In spite of the mixed market reaction on Wednesday afternoon (S&P and Nasdaq were down, while the Dow and Russell 2000 were up), they were all up yesterday. And it was no surprise that the small-caps led the way.

All-sized borrowers should see relief with lower interest rates. But, since small-caps tend to have a higher proportion of debt than their larger counterparts, and often borrow at less favorable terms, the resumption of interest rate cuts (and more cuts than previously expected) should have a sizable impact on small-caps.

Of course, tech, driven by AI, is still a big driver. And will be for years to come. But other industries are breaking out as well, and categories. That includes small-caps. And the market-breadth expansion should help lift even more stocks as the rally continues.

In other news, stocks got a lift after it was announced that NVIDIA would be investing $5 billion into Intel. NVIDIA's CEO Jensen Huang said, "this partnership is a recognition that computing has fundamentally changed. The era of accelerated and AI computing has arrived." They will be working together on AI infrastructure, datacenters and PCs. NVIDIA was up 3.49% yesterday, while Intel jumped 22.8%.

On the economic report front, Weekly Jobless Claims were down -33,000 at 231,000 vs. the consensus for 246,000. The smoother 4-week moving average came in at 240K.

The Leading Indicators report eased -0.5% m/m vs. last month's upwardly revised 0.1% (from -0.1%).

And the Philadelphia Fed Manufacturing Index rose sharply to 23.2 from last month's -0.3 and estimates for 3.0.

Today, all we?ll get is the Weekly Hughes Rig Count report.

Although, it is Quadruple Witching today, which means index futures, stock futures, index options, and stock options all expire. So, there could be some extra volatility.

But stocks are already up nicely for the week, so far. And if all goes well today, the major indexes could notch another up week, making it 2 up weeks in a row for the Dow; 3 up weeks in a row for the S&P 500 and Nasdaq; and a whopping 7 up weeks in a row for the small-cap Russell 2000.

Best,